# Confused about how to plan for the future



## sinky (9 Jan 2017)

Hi All,

I'm a 39 y.o. civil servant. I must contribute to my Gov pension but at 65 I will have 35 years of service instead of 40. Before I got my civil service job I had two roles in the private sector both with mandatory pensions.

One was transferred to a Zurich Life PRSA current value circa €7k
The second was transferred to an Irish Life PRB valued circa €9k
I have 24 years left on a mortgage - about €140,000 remaining @ 3.6%
I have about €15k in savings
Single & no dependants 

*Questions*

Should I pay a lump sum off my mortgage or invest or make contributions to a PRSA?
I don't need the savings in cash but I don't know what to do with them for the longterm
If people recommend PRSA or investments - what products/brokers would people recommend?
Am I entitled to tax relief on additional pension contributions when I pay into a gov pension?
Should I buy back some of the years I'm short for my full gov pension even though I am not sure if I will stay in this job until I retire. I might go back to private industry in the next 5-10 years.
Should I amalgamate the Zurich/Irish Life products? Am I paying twice the mgmt fee?
Thanks in advance - I'm only starting to think about pension etc now. 

Sinky


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## PGF2016 (9 Jan 2017)

Is the 15k savings your emergency fund (6 months living expenses)? If so you shouldn't do anything with it except put it in the highest interest rate savings account available.


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## sinky (9 Jan 2017)

PGF2016 said:


> Is the 15k savings your emergency fund (6 months living expenses)? If so you shouldn't do anything with it except put it in the highest interest rate savings account available.


Yes it is an emergency fund. I am currently saving about €300 p.m. into it so I could redirect that to a PRSA/investment and keep the €15k in cash


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## gnf_ireland (9 Jan 2017)

sinky said:


> I have 24 years left on a mortgage - about €140,000 remaining @ 3.6%


What is your loan to value on your mortgage? Is there any way you can switch mortgage providers to get a lower rate of interest? If you can this should be the first thing you should do, as it can save you thousands.

The 15k emergency fund should be plenty for you. I assume you have income protection with your job so you don't have to worry about that aspect of things. You are also unlikely to be let go/made redundant, so again you need to review what your emergency fund is for. I would not increase it unless you have a specific concern.

By my calculation, you are paying ~727 a month on mortgage for the next 24 years (mortgage free at 63). If you divert the 300 euro a month into your mortgage, you will knock 9 years 4 months off the term of the mortgage and be free at 54 ! You will also save 29,000 in interest.

If I was you I would not pay AVC's until you are close to mortgage free. I would pay the 300 a month against your mortgage during your 40's and reevaluate every 5 years.

I would still focus on switching your mortgage for a better rate if you can ! If you could knock 0.5% off it, you would save 10k over the lifetime of the mortgage (less if you overpay obviously)


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## sinky (10 Jan 2017)

Thanks my LTV ratio is 70% ish. I am looking into getting a rate of 3.1%.
I thought if you invest in PRSAs etc when you're younger it's better than waiting til the mortgage is paid off?


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## trasneoir (10 Jan 2017)

sinky said:


> I thought if you invest in PRSAs etc when you're younger it's better than waiting til the mortgage is paid off?


With _any _kind of investment, the earlier you put money in, the longer you've got for compound interest to work it's magic. 

This is true of pensions, but also mortgages. Paying down your mortgage gives a guaranteed, compounding, tax-free return of 3.6% (or whatever average interest rate prevails). It's a really good alternative to other after-tax investments.

On the other hand, if you are paying tax at the higher rate, then I'd start paying into a pension. The tax benefits are massive, and I'd rather not have 90% of your net worth tied up in a single house at age 55.


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## gnf_ireland (10 Jan 2017)

trasneoir said:


> On the other hand, if you are paying tax at the higher rate, then I'd start paying into a pension.



Remember the OP is a civil servant who will have 35 years service. As I understand it, this will equate to 35/80th of their final salary (assume they signed up before this rule changed). Assuming an Admin Officer scale (no idea what pay grade the OP is on, so using this one as a base), the max pay scale in 2016 is 58,294. A 35 year service as opposed to 40 year one would mean 25,500 pa pension as opposed  to 29,000 pa one. I am wondering if it is really worth paying into AVC's at this stage while mortgage is at >3%



trasneoir said:


> I'd rather not have 90% of your net worth tied up in a single house at age 55.


Surely his pension pot would be a major asset at this stage also. I am guessing it would be worth a fair bit by retirement age, given it is effectively risk free. Without knowing salary there is no idea of putting a figure on it


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## sinky (10 Jan 2017)

> Without knowing salary there is no idea of putting a figure on it



My salary is about €45k max point on the scale is €59k (at the moment)
My aim is just that I can have a nice lifestyle when I'm older being able to travel and if I have to pay for a home/healthcare etc.
I'm not worried about leaving anything in my will 
If the state pension was gone it would be hard to live on €25k I reckon even mortgage-free
Would I be entitled to tax relief on a PRSA when I have a state pension contribution?

Thanks for all the replies


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## gnf_ireland (10 Jan 2017)

sinky said:


> If the state pension was gone it would be hard to live on €25k I reckon even mortgage-free



Do Civil Servants get a state pension on top of their DB pensions? I thought they did not ! The 35/80 times salary included the old age pension. Others open to correct me on this

BTW the vast majority of people your age in Ireland will be living on less than 25k once they hit retirement


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## sinky (10 Jan 2017)

gnf_ireland said:


> Do Civil Servants get a state pension on top of their DB pensions? I thought they did not ! The 35/80 times salary included the old age pension. Others open to correct me on this
> 
> BTW the vast majority of people your age in Ireland will be living on less than 25k once they hit retirement



Oh! I really don't know about pensions which is why I'm trying educate myself and plan now. 
That €25k would be gross too subject to income tax right?


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## Protocol (11 Jan 2017)

sinky said:


> Would I be entitled to tax relief on a PRSA when I have a state pension contribution?



You have asked the same question twice.

Let me answer.

All pension contributions receive tax relief, subject to generous age limits.


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## Protocol (11 Jan 2017)

gnf_ireland said:


> Do Civil Servants get a state pension on top of their DB pensions? I thought they did not ! The 35/80 times salary included the old age pension. Others open to correct me on this



Public servants hired before April 95 do not pay full-rate PRSI, and so will not receive a State Pension [CSP].

Public servants hired since April 95 do pay full-rate PRSI, and so will receive a State Pension [CSP].


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## Protocol (11 Jan 2017)

sinky said:


> Oh! I really don't know about pensions which is why I'm trying educate myself and plan now.
> That €25k would be gross too subject to income tax right?



All income is taxable.


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## gnf_ireland (11 Jan 2017)

@Protocol  So just to get this right. If the OP retires at age 65, they should receive a pension of 25,800 (59k * 35/80)  *I am assuming they are on a final salary DB pension.
At aged 68, when the CSP kicks in, the OP will then have a pension of 37,800 (25,800 + 12,000 approximately) *assuming CSP remains the same


I always understood all DB pensions factored in the CSP in them, similar to the way sick cover & maternity cover are reduced by the state payments (normally). I do stand to be corrected here, as I am not an expert on DB or state pensions.


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## Protocol (11 Jan 2017)

PS hired pre-95, pay low-rate PRSI, don't get CSP.

PS hired post April 95, do pay PRSI, will get an integrated pension.

This person is 39, and joined the PS aged 30, so joined after 1995.

So they are paying PRSI class A at 4%, and should get a CSP.

The PS pension will be adjusted due to this.

The PS pension component will *not *be (35/80)(final salary), it will be less.


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## Slim (11 Jan 2017)

OP, have you explored the possibility of buying 'added years' from your employer to make up for the 4 year shortfall at age 65? There is a thread on here about whether or not it is worth it but it is an option. See here: http://www.askaboutmoney.com/threads/should-i-buy-years-or-contribute-to-an-avc-prsa.60842/


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## sinky (11 Jan 2017)

Slim said:


> OP, have you explored the possibility of buying 'added years' from your employer to make up for the 4 year shortfall at age 65? There is a thread on here about whether or not it is worth it but it is an option. See here: http://www.askaboutmoney.com/threads/should-i-buy-years-or-contribute-to-an-avc-prsa.60842/



Thank you yes I got a quote but I am slow to do it as I don't know if I will stay in my current job until retirement so this puts me off as I don't know if it would still be of benefit.


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## Slim (11 Jan 2017)

sinky said:


> Thank you yes I got a quote but I am slow to do it as I don't know if I will stay in my current job until retirement so this puts me off as I don't know if it would still be of benefit.


Ah! Just re-read your OP. See that now.


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## gnf_ireland (11 Jan 2017)

Protocol said:


> This person is 39, and joined the PS aged 30, so joined after 1995.
> 
> So they are paying PRSI class A at 4%, and should get a CSP.
> 
> ...



Thanks for correcting me on this. Its probably best the OP gets clarity on their side on what the pension they would be entitled to, all things remain the same. This should be the first step, and then the OP should determine if there is a sizeable shortfall they wish to fill.



sinky said:


> Thank you yes I got a quote but I am slow to do it as I don't know if I will stay in my current job until retirement so this puts me off as I don't know if it would still be of benefit.


This is very important for you to consider this. As people hit their 40's and 50's pension entitlements become very important. You need to understand what the impact of changing job would be in this area and whether you would actually benefit both short and long term from it

If you are serious about moving jobs in the next number of years, then I would be seriously considering an PRSA


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