# Last nights Prime-Time (Pension query)



## justsome1 (1 May 2013)

Hi 

I was listening to Prime Time last night.

There was a discussion around a pensioner (Maurice Hudson) who lost  €450,000 in his pension when IBRC was liquidated - as it wasn't covered  under any protection scheme.

Afterwards; Stephen Donnelly (Independent TD.) was on speaking and said that:

€450,000 (while larger than the average pension pot) would roughly give a  pension of €27,000 a year - something similar to a public servant who'd  retire on a salary of €54k - €55k

I would have thought that this would have been an insufficent amount in the pension fund to give such a yearly pension. 

Can someone with expertise in the area confirm?

Thanks


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## Don_08 (1 May 2013)

Really!!  


To provide a pension of 27k to a 65 yr old male with no spouse and not increasing in payment would cost 555k.


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## Don_08 (1 May 2013)

Just for curiosity , to provide similar pension to public service pension. Retirement at 60, inflation linked increases and 50% spouses on death. A pension of 27k would cost 1.24m on the open market.


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## Jim2007 (1 May 2013)

justsome1 said:


> I would have thought that this would have been an insufficent amount in the pension fund to give such a yearly pension.



No, I would agree with him - in fact I get the exact same figure when I do the calculation!


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## maturin (1 May 2013)

I punched the figures into the Irish Life annuity quote application. For a 65 year old male with a 450K fund, they would offer a flat pension of 21400. For a pension rising at the rate of inflation, they quote approx 13700. If you wanted to include a 50% widows pension (assume also aged 65), the quote was for 12200.

Pensions are expensive!


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## justsome1 (1 May 2013)

thanks for the info


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## justsome1 (1 May 2013)

Jim2007 said:


> No, I would agree with him - in fact I get the exact same figure when I do the calculation!




Hi,

Can you confirm how you came to the same conclusion? 

How did you do the calculation?

thanks


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## Daddy (2 May 2013)

I thought Miriam said that 450k would be roughly an average pension pot.    I would have thought far from it.   Don't think too many would have that at retirement more like 250k I would have thought the average pension pot.


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## Jim2007 (2 May 2013)

justsome1 said:


> Can you confirm how you came to the same conclusion?



Assume a 6% annuity - it's a fairly common rule of thumb used in mainland Europe to check the reasonability of a proposed pension plan.


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## Conan (2 May 2013)

Jim,
But this is an Irish site. Quoting supposed "mainland Europe" annuity rates does not help. Why "assume" 6% when one can get an exact figure so easily. 
I can only hope that Stephen Donnelly's other economic figures and projections are a little more accurate rather than picking some numbers out of the mainland Europe air.


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## Jim2007 (2 May 2013)

Conan said:


> Jim,
> But this is an Irish site. Quoting supposed "mainland Europe" annuity rates does not help. Why "assume" 6% when one can get an exact figure so easily.
> I can only hope that Stephen Donnelly's other economic figures and projections are a little more accurate rather than picking some numbers out of the mainland Europe air.



We are part of the Eurozone and like it or not as economic polices become more coordinated we will gravitate towards the mean!  Furthermore as financial markets are opening up, such products will be more widely available.  Thus for someone with a 20 to 30 year time frame it is not a bad yard stick as to what can be realistically expected.

I don't know how you get to an exact figure since you are talking about an event that will occur so far into the future and is dependent on the financial products you select and their performance over time...

The 6% rule of thumb is only used as yardstick to quickly answere questions such as how much assets do I need to accumulate so that I can have a pension of X?  Or are the pension projections that I have been given reasonable?  If you are seen figures that are significantly different to this, then you need to pay great attention as to what assumptions are being used and the levels of risk being assumed.


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