# What is the point in having a private pension that will result in less than 300 euro?



## greentree (21 May 2007)

Wonder if ye can help me..

I just heard the Govt saying that in 5 years time the state pension will be 300 euro per week.

Currently I have a small private pension, putting in about 250 per month. My question is:

What is the point in having a private pension that will result in less than 300 euro per week when I retire? Would I be better to just get the state pension instead and stop wasting money on this private pension?

Any comments??!


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## Welfarite (21 May 2007)

*Re: State Pension*

Are you paying PRSI that will go towards qualifying you for the State Pension, as well as your private pension?


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## greentree (21 May 2007)

*Re: State Pension*

I am self employed and pay very little PRSI. S3 class I think. About 45 euro a month...


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## Guest126 (21 May 2007)

*Re: State Pension*

For most people it makes sense to have both pensions!


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## Welfarite (21 May 2007)

*Re: State Pension*

If you are paying Class S you are covering yourself for State Pension so seems like you'll get two pensions. You are also covered for Survivor's Pension and Bereavement Grant, BTW


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## greentree (21 May 2007)

*Re: State Pension*



Welfarite said:


> If you are paying Class S you are covering yourself for State Pension so seems like you'll get two pensions



I thought everyone gets the state pension, even if they dont pay PRSI ??


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## jpd (21 May 2007)

*Re: State Pension*

You need PRSI to qualify for a contributary state pension. Otherwise, you may qualify for a non-contributory state pension but this is means tested so unless you have no other income and little or no assets you won't qualify


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## Fanny (21 May 2007)

*Re: State Pension*

How about people working part time who don't pay PRSI, but their employer does, and they are on "A0", I thought that this would be counted as a full contribution as long as it is A, or is that wrong? 
I also have a PRSA. Now, if I will not qualify for a non-contrib. pension, would that mean my PRSA would actually be counted as means? 
FANNY


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## Welfarite (21 May 2007)

*Re: State Pension*

You will get a pension if you are class A. Sorry for confusing things. The amount of PRSI does not matter, whether its you or the employer. 

Don't really understand the second part of the question. PRSI is not means (i.e income), it is a social tax/contribution taken from you or your employer to fund pensions and SW benefits.


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## ClubMan (21 May 2007)

*Re: State Pension*



Fanny said:


> I also have a PRSA. Now, if I will not qualify for a non-contrib. pension, would that mean my PRSA would actually be counted as means?


As far as I know yes - it would be.


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## greentree (21 May 2007)

*Re: What is the point in having a private pension that will result in less than 300 e*

OK! Thanks for the answers - let me rephrase this!

If I am not entitled to the contributory pension, ie only the state pension, what is the point in me having a private pension that will provide less than 300 euro per week?

Basically, my private pension works out at only 136 euro per week when I retire. So would I not be better off to just ditch this private pension?

Thanks


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## ClubMan (21 May 2007)

*Re: What is the point in having a private pension that will result in less than 300 e*



greentree said:


> Basically, my private pension works out at only 136 euro per week when I retire. So would I not be better off to just ditch this private pension?


On what basis is this projection made? Is it based on the current value of the fund, does it take into account ongoing contributions, does it assume a certain growth rate because nobody can predict future asset performance in advance, are you invested in the most appropriate funds/mix for your needs (most likely a high risk/reward/equity content if you have a while to go to retirement) etc.? Maybe you should consider increasing your pension contributions to avail of further tax/_PRSI _relief and with a view towards boosting your pension fund value long term? If in doubt you should consider getting independent, professional advice on what's best for your specific circumstances.


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## greentree (21 May 2007)

*Re: What is the point in having a private pension that will result in less than 300 e*

This projection is made in my annual statement assuming an annual growth rate of 4.88%

Even if my return went up to 280 euro per month, my question still remains - whats the point in having this if the state pension will be 300 euro pm?


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## ClubMan (21 May 2007)

*Re: What is the point in having a private pension that will result in less than 300 e*

4.88% seems a very low assumed growth rate. One would be expecting a high equity content fund to perform much better than that in the long run. The state pension is not yet €300 p.w. and even if it does reach that level then you need to consider that inflation is currently c. 5% and who knows what the real value of the state pension will be at retirement? In my opinion anybody who can afford to save towards their retirement (having first purchased their own house in most cases) should do so even if they expect to qualify for a state contributory or non contributory pension.


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## Welfarite (22 May 2007)

*Re: What is the point in having a private pension that will result in less than 300 e*



greentree said:


> Basically, my private pension works out at only 136 euro per week when I retire. So would I not be better off to just ditch this private pension?
> 
> Thanks



If you had a private pension income of that amount, and assume no other factors assessable as means, you would still be entitled to a pension of 92.50 per week on today's state pension rates. 

However, you're rephrased question is hypothetical, I presume, because to be paying into a private pension fund without any income (as would be the scenario if you had to claim non-contributory state pension) is unusual, even unlikely. You're original question is more likely the case, yeah?


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## Fanny (22 May 2007)

*Re: What is the point in having a private pension that will result in less than 300 e*

Well, not sure if to agree with this one, Welfarite. Many people especially Irish or fellow Europeans who have worked self-employed in other EU countries (where self-employed cannot easily benefit from a state pension), as well as many women who stayed at home, people with many years in education or abroad, do not simply qualify for a contributory state pension, and will have to undergo a means-test. At the same time, especially this group of people has an interest in boosting their pension prospects, and might earn good money at the moment. Typically, they are missing contribution years for a contributory pension. 
I have started a PRSA but a bit half-hearted, as it might give me a disadvantage later when counted as means! I do not own propertry neither do I consider buying at this stage. I know a home would not be counted as means though. Is it a bad idea to pay into a PRSA unless I can be sure I will get a non-contributory pension, would the money be better invested e.g. in property abroad, I wonder? It's impossible to find out how to "buy back lost years". So how can one catch up paying contributions? Is a PRSA really a good idea? 
As for your response above to my second question, (check out above) I think there ws confusion because you misread PRSA as PRSI. Thanks anyway for your ideas.

Greentree,
it is possible to get your pension income from different sources and boost your state pension. However, if you expect to receive a non-contributory pension, you are probably helping the state out rather than boosting your own income? It is hard to see what kind of laws will come in until then, and whether we can avail of anything really. But it does not inspire people to put money into a pension... 

Fanny



Welfarite said:


> to be paying into a private pension fund without any income (as would be the scenario if you had to claim non-contributory state pension) is unusual, even unlikely. You're original question is more likely the case, yeah?


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## Towger (22 May 2007)

AFAIK you can buy years of PRSI contributions, to make up missing years. Also, you will be credited for each year you have a child receiving the Children’s Allowance

Towger


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## Fanny (22 May 2007)

Thanks Towger, 
do you know where to find details on this? I tried to find information about how to "buy years back" but I could not get any details or clear answers so far, looks like you can only find out a few years before your pension (when it is too late, really). That option might not even be available anymore.
I know about the Irish home maker scheme and baby years, however, my lost years go back to years of freelance work and having lived on the continent. I read that > 60% of Irish women won't have a pension on which they could survive. Maybe it's just research by banks who want more PRSA customers. However, non of my friends wants to "worry about pensions". We would need a full employment record at the end of our life to receive a full non-contributory state pension. Most people I know don't fulfill that criteria, despite homemaker years, recognition of pension years in other EEC countries etc. 
So if I have some money to spare now and don't want to face poverty in the future, what's the best way to go when it comes to pensions? 
Fanny


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## Welfarite (22 May 2007)

http://www.welfare.ie/publications/sw118.html#app3


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## Welfarite (22 May 2007)

Fanny, I don't think you can "buy years" to add to a SW pension. The "Homemaker's Scheme was brought in to try and help women who left work to raise families and then returned to work afterwards. The "years of freelance work" you mention should have been covered by you voluntarily (in former years) paying Class S (now compulsory). Your best bet is to read up the SW link above and try and work out your own situation as it stands. You could try and get the Pensions section to do a forecast for you if you are close to pension age, based on if you keep working and paying PRSI. You'll need to give them details of all employments, etc..


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## Towger (22 May 2007)

I tried looking for the information on their site, needless to say I could not find it. But I am 95% sure I read it a couple of years ago.

Page 56 of this report talks about enabling "persons without full PRSI contributions to retrospectively buy PRSI contributions"
http://www.socialinclusion.ie/documents/ConsultationReport2006-2008.pdf

This might also be of interest: Guide to voluntary contributions - SW 8
http://www.welfare.ie/publications/sw8.pdf

Towger


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## Fanny (24 May 2007)

Thanks Towger, will check out the links. I found it hard to get into permanent employment after finishing university. I was working in France and Germany, where it is not as easy as here to start a career, so many people would spend many years at college, volunteer work, freelance work, self-employment. As you would not have any funds at that age, and no pension system would have registered you, you'd just lose those pension years. We were not given the option to pay AVCs or similar. Students would typically finish university at 27-29 and then find it hard to get into employment. That's why I left the country. I have an unbroken record since I've come to Ireland seven years ago. I'm in my mid-forties. However, even if I worked non-stop until pension age I might be short of contributions. 
Thanks for the links, will check them out and get a pension preview. 
The main question remains though, is it worth investing into my PRSA if I might get a means-tested social welfare pension only? Also I could not find any info of how my PRSA would be taxed if I moved back to France or Germany. I cannot pay into a supplementary pension over there, because I work here. If you know any links or have any idea concerning European-wide handling of pensions let me know.

Fanny


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## huskerdu (30 May 2007)

the OP question was based on the fact that ther believed a polititians promise to increase the state pension to 300 a week. 

I would make two points

I would not be making retirement plans based on polititians promises
Inflation will mean that the state pension will always remain paltry.


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## South (30 May 2007)

Would also point out the the level of the State Contributory Retirement Pension should not discourage a person from having a private pension, unless the State Pension will cover that person's needs in retirement.


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