# Dissapointed by pension



## bill_cash (25 Feb 2019)

Hi guys,


Posting this query for my spouse.


They have recently started a new job and are 30 years old earning €75k.


They and their employer are making pension contributions totalling 20% (€15k per anum).


If they keep this up for the next 38 years according to the pensions authority pension calculator (can't post link due to post count) they will only receive a pension of circa €24k (ignoring the state pension which they will also be entitled to under _current_ rules).


I don't know what my query is, just that it doesn't seem that much I guess. Would that calculation include some sort of cash lump sum on retirement? Putting away €1250 per month in a pension from 30 seems like it would be on the upper end of contributions. I honestly don't know what is going to happen to the hundreds of thousands paying a few % of incomes like €35k per anum etc.


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## elacsaplau (25 Feb 2019)

Hi Bill,

I haven't checked just now but I remember looking at this before.

Basically, for DC money the pensions authority prescribes assumptions for projection purposes that are conservative.

The self-same authority, for DB plans (say, in the calculation of the statutory transfer value), prescribes assumptions for calculation purposes which are aggressive.

I am not aware of the authority ever even attempting to explain the difference? If I've got this last bit wrong, can someone let me know please? Maybe later, if time permits, I'll illustrate this numerically.


Anyways, to answer your question, long-term conservative assumptions will show, well, long-term uninspiring outcomes!


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## aristotle (25 Feb 2019)

Put the numbers into some of the online pension calculators and read the assumptions on it.

He\she can also do AVC's. And the fund you invest into probably should be high in equities at that young age.

There will likely be a good pension pot in 30-35 years with putting in 15k p.a. which will probably go up as earnings go up.

Also, read about options at retirement, taking an annuity is just one option.


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## Zebedee (25 Feb 2019)

In some of the pension calculators the pension is shown in “real” terms (after projected inflation) to give you an idea of what it looks like in today’s prices. This needs to be factored into your expectations.


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## Duke of Marmalade (25 Feb 2019)

Pension Authority said:
			
		

> *Pension Calculator*
> *Assumptions*
> 
> All values shown are in present day money terms, i.e. the calculations aim to take account of inflation between now and your retirement date.
> ...


These are conservative assumptions.  In particular,  it assumes you earn 2% p.a. in retirement and your pension increases by 1.5% p.a., that is a real return of 0.5% p.a.  Admittedly this is the basis of commercial annuity rates but a more aggressive investment strategy on an ARF might do better than that.  A real net investment return of 1.5% p.a. (4% - 2.5%) pre retirement also seems  conservative.


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## bill_cash (26 Feb 2019)

Thanks for the advice guys, so I guess the general feedback is that the pensions authority err on the side of caution which is understandable.

The fund is I believe 100% in equities given the long time to drawdown.

Retirement is expensive to fund and feels very remote, I suppose our own parents' approaching retirement has focused our mind on the issue to some degree.

Thanks for the feedback,
Bill


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## misemoi (26 Feb 2019)

I am trying to focus on retirement too, and aside from funding the pension plan, I believe it's also important to understand what your cost of living will be in retirement, rather than just having a number in mind.  Items I am considering are age of children when I retire, ie are they earning an income themselves, increased cost of health insurance as I will upgrade plan as I get older, maintenance cost of house and car replacement.  You might be surprised about your income level required if you compare it against your current income/expense.  Certainly paying a mortgage and childcare takes a large % of our disposable income right now.  Looking at my parents, they are enjoying a much higher disposable income in retirement.


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## Don Gately (4 Mar 2019)

To the OP I think that your spouse is in a very good place pension wise, right age profile and a very decent contribution. Is it indexed at all?


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