# no old age pension for those under 40



## joe sod (29 Sep 2018)

I was listening to a talk show and they were talking about the new auto enrolement pension scheme coming in 2021 (of course it could be pushed out again). A pension provider was saying that when he is devising pension schemes for the under 40s he discounts completely the state "old age pension" because there is a good probability that this will effectively not exist for this age group on retirement.  Of course no politician or public official will openly discuss this stuff.


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## mtk (29 Sep 2018)

Clearly its in any advisers interest to do that -> greater need and fear ->need to pay higher contribution-> greater commission for adviser.


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## noproblem (29 Sep 2018)

If the ordinary Joe Blogg pays into a private pension scheme over the next 35/40 years can anyone give Joe an indication, in ordinary peoples language, of where exactly his money is going to? Like, is it buying  some of the big blocks of apartments in Dublin for letting, the office buildings, the warehouses or is it just simply invested in shares in Coca Cola and similar? Or, as we so commonly hear that it's being put into special funds that invest in markets, etc? It's just that ordinary workers aren't really being told or properly informed as to where their money is going and who is benefiting and by how much?


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## Gordon Gekko (29 Sep 2018)

The above is part of the problem.

People have seen share portfolios wiped out and other people’s money stolen or mismanaged by charlatans.

Investing through a pension is great if it’s done right.

And you can invest in pretty much anything you like.


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## Protocol (29 Sep 2018)

No Problem,

You choose what funds you want your contributions in.


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## noproblem (29 Sep 2018)

Protocol said:


> No Problem,
> 
> You choose what funds you want your contributions in.



Thanks for informing me of exactly what I want the answer to. Read my question again?


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## joe sod (3 Oct 2018)

mtk said:


> Clearly its in any advisers interest to do that -> greater need and fear ->need to pay higher contribution-> greater commission for adviser.



thats true and i am aware of that but it doesnt take away from the fundamental truth that the government wont be able to continue to pay out for the old age pension at current rates. Of course they cant be explicit about this for fear of frightening the horses and those horses are needed to pay for todays pensions. In the last financial crisis Ireland had 50 billion of debt, today it has over 200 billion. Therefore Ireland will not be able to borrow its way out like it did the last time, really hard decisions will have to be made


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## cremeegg (4 Oct 2018)

I am not really sure what you are getting at here.

I think this is one of the few clear aspects of pensions.


noproblem said:


> If the ordinary Joe Blogg pays into a private pension scheme over the next 35/40 years can anyone give Joe an indication, in ordinary peoples language, of where exactly his money is going to? Like, is it buying  some of the big blocks of apartments in Dublin for letting, the office buildings, the warehouses



I was offered an Irish property fund for my pension. I said no.



noproblem said:


> or is it just simply invested in shares in Coca Cola and similar?



I was also offered an Irish equity fund, I said no.

I was offered a US equity fund, I said no.




noproblem said:


> Or, as we so commonly hear that it's being put into special funds that invest in markets, etc?



I was offered several of these funds, I said in my opinion that kind of obscure investment fund gives huge scope for charlatans and I want nothing to do with it.




noproblem said:


> It's just that ordinary workers aren't really being told or properly informed as to where their money is going and who is benefiting and by how much?



Suddenly you change the question from where the money is going to who benefits.

Charges in pensions are complex and the providers make every effort to hide them. That’s a different issue.


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## RETIRED2017 (4 Oct 2018)

looking at the latest auto-enrollment figures the cost of the tax break is 2.4 billion per year ,If you look at the amount taken in Income tax in 2017 was 20 billion ,
SO 12% of our income tax bill of 20 billion was given back in tax break who are these people ,
To get 12% tax break of all income tax @40% you would need to be putting away 30 % of your income,
I suspect this group will have enough when they retire,

Including my good self,

most of the 2.4 billion tax break should be targeted at people under 40
the tax breaks age range should be the other way round and more generous to the younger age group's,


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## Zenith63 (4 Oct 2018)

noproblem said:


> Thanks for informing me of exactly what I want the answer to. Read my question again?


To be fair it's not really too clear what you're asking to me either.  The likes of this document from Irish Life on one of their pension funds gives a fairly detailed breakdown of where the money goes (not to an individual share or property address certainly, but I don't think Joe Sixpack cares about that?) - https://www.ilim.com/fund-fact-sheets/retail/+++-Portfolio_Pension_2.pdf.  Are you saying that Irish Life should be more detailed in their breakdown, or that companies are not giving their employees visibility of which funds their money is going into in the first place, let alone what those funds would do with it?


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## Steven Barrett (4 Oct 2018)

joe sod said:


> I was listening to a talk show and they were talking about the new auto enrolement pension scheme coming in 2021 (of course it could be pushed out again). A pension provider was saying that when he is devising pension schemes for the under 40s he discounts completely the state "old age pension" because there is a good probability that this will effectively not exist for this age group on retirement.  Of course no politician or public official will openly discuss this stuff.



Given the State pension is worth about €400,000, it is really going to put the frighteners on people if it is assumed that isn't going to be around. And it is a pretty big assumption by the advisor to say that the govt are going to take away a benefit worth so much, especially seeing as they are increasing it all the time at the moment. 

We have to deal with the facts that we have today. Someone under age 40 will get the OAP at age 68. That age will be increased over time based on mortality tables. 



noproblem said:


> If the ordinary Joe Blogg pays into a private pension scheme over the next 35/40 years can anyone give Joe an indication, in ordinary peoples language, of where exactly his money is going to? Like, is it buying  some of the big blocks of apartments in Dublin for letting, the office buildings, the warehouses or is it just simply invested in shares in Coca Cola and similar? Or, as we so commonly hear that it's being put into special funds that invest in markets, etc? It's just that ordinary workers aren't really being told or properly informed as to where their money is going and who is benefiting and by how much?



Your bog standard Balanced Managed fund is mainly made up of global stocks like Coca Cola (the market). There is also an element in property, such as the large shopping centres, office blocks and distribution centres all around the country. Another element is in loans to governments and companies, who pay interest in return. Finally, an element in cash. 

You can invest in those different asset classes on their own and leave out the other parts. And with equities and bonds, you can be more specific. You can invest just in the US market or just the European market. Same with bonds, you can invest in just company loans or just govt loans or regions or the length of time of the loan. 

There is lot more than that, but I'd be here all day and you'd only get bored. 

Steven
www.bluewaterfp.ie


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## RETIRED2017 (4 Oct 2018)

If you deal in facts where is the fund to pay out today's under 40 going to come from when they reach 68,


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## joe sod (4 Oct 2018)

@SBarrett, so the state pension is actually worth 400k !!!, I thought it was 200k so its actually twice as costly. I know the vast majority of people receiving the pension today never paid anywhere near that sum in pris even if you go back and revalue  their payments to account for inflation. There is something really wrong here, Ireland will need to bring in millions of workers to pay for this unfortunately we have already exhausted the supply from eastern Europe. It is also dumb as those immigrants will get old and sick and will need even bigger waves of migration to pay for them.  We are coming to the rock and the hard place decision soon


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## RETIRED2017 (4 Oct 2018)

Between 300K and400k 
!00000 will buy you 4000 for life possibly with about 2 % increase per year,


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## joe sod (4 Oct 2018)

SBarrett said:


> We have to deal with the facts that we have today. Someone under age 40 will get the OAP at age 68.



The same advice could have been given to a polish worker entering retirement in 1988, we deal with the facts as they exist today, unfortunately within 2 years his pension entitlement was decimated by the collapse of the Soviet union. Sometimes you have to look at the big picture. The big picture in Ireland is that pension entitlements are unsustainable and that some day the state will not be able to pay. This maybe precipitated by some big event on the world stage, we dodged the bullet during the financial crisis. Of course people will say that we took a hit but not like what happened Poland in 1990.


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## Sophrosyne (5 Oct 2018)

joe sod said:


> A pension provider was saying that when he is devising pension schemes for the under 40s he discounts completely the state "old age pension" because there is a good probability that this will effectively not exist for this age group on retirement.



But why would he say that, unless he has a crystal ball?

It is rather like someone in 1968 Ireland making assumptions about 2018 Ireland. Google everything that changed in Ireland in that 50-year period.

Certain industries disappeared, other industries emerged. Demographics have not been linear. 

We can only make any sort of credible predictions for 2-5 years.

What will happen in the next 50 years? Who knows?


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## David1234 (5 Oct 2018)

There is a massive deficit in the funding for the state pension. I know what we should do

https://www.independent.ie/business...or-welfare-recipients-in-budget-37386372.html

This probably annoys me more than it should.


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## Steven Barrett (5 Oct 2018)

joe sod said:


> The same advice could have been given to a polish worker entering retirement in 1988, we deal with the facts as they exist today, unfortunately within 2 years his pension entitlement was decimated by the collapse of the Soviet union. Sometimes you have to look at the big picture. The big picture in Ireland is that pension entitlements are unsustainable and that some day the state will not be able to pay. This maybe precipitated by some big event on the world stage, we dodged the bullet during the financial crisis. Of course people will say that we took a hit but not like what happened Poland in 1990.



You are picking an extreme economic event. What is the Irish equivalent to that? The collapse of capitalism? Well, what good would a private pension be in that case? 

From years of experience advising people to save for retirement, putting the frighteners on them doesn't work. Telling them they'll get nothing from the State and they'll need to increase that contribution from €500 a month to €3,000 a month usually results in them doing nothing at all. It is self defeating.

The govt have been clear that their intention is to ensure the State pension is paid for the same amount of time for all generations based on mortality rates. So if we're living longer, we will receive the benefit later in life. If you don't want to work that late, you'll have to do something about it yourself. 

But I do agree there is a huge issue with funding the cost of this benefits. Govts keep on increasing the benefit without saving for it. Why? Because they can spend the money now on something else that will win them votes. Having a fund there that can be used in 30/40 years time is of no benefit to them now. 

Steven
www.bluewaterfp.ie


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## Jimmy Dee (5 Oct 2018)

Beg the government to ignore sectional interests, get them to talk to Vanguard and Blackrock, remind those providers how great is to be located here, amend the silly rates of tax and open up simple ETF's/ MF's to ordinary people. With 0.2% TER or less. Allow and / or invite VG and B to provide their advice service. That would be a good start.


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## joe sod (5 Oct 2018)

SBarrett said:


> You are picking an extreme economic event. What is the Irish equivalent to that? The collapse of capitalism? Well, what good would a private pension be in that case?



You make good points but an Irish equivalent could be the collapse of the euro or break up of European union, this is actually not such an unlikely event as it came close during the financial crisis. This would be equivalent to break up of Soviet union. A return to a seriously devalued Irish punt would be sort of equivalent to Poland in early 90s. These do and have happened and are not to be discounted.
However what is more worrying is the populism of successive Irish governments, they keep increasing pension and welfare payments without regard to the sustainability of these systems. I think fine Gael might have miscalculated their support levels they seem to be going all out to get the young socialites and are ignoring their core supporters.


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## orka (5 Oct 2018)

Sophrosyne said:


> But why would he say that, unless he has a crystal ball?


I think it's a very sensible thing to at least advise people of the possibility of.  I personally am assuming that the contributory pension will either be much lower or at least partially means-tested by the time I get to state retirement age.  I'm aiming to have sufficient pension/other investments excluding the state pension.  If the state pension is there or not means-tested, great - but I really don't want to have watch the pennies in my old age because I didn't plan for something that was quite foreseeable (at least as at a high probability if not a certainty).


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## Sophrosyne (5 Oct 2018)

orka said:


> I think it's a very sensible thing to at least advise people of the possibility of. I personally am assuming that the contributory pension will either be much lower or at least partially means-tested by the time I get to state retirement age. I'm aiming to have sufficient pension/other investments excluding the state pension. If the state pension is there or not means-tested, great - but I really don't want to have watch the pennies in my old age because I didn't plan for something that was quite foreseeable (at least as at a high probability if not a certainty).



Good for you, personally.

But a pension advisor should be presenting an one the one hand the contributory OAP may not survive, but on the other hand it might and let the investor decide.


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## noproblem (5 Oct 2018)

Don't know if it's because there's an industry out there promoting it and making a lot of money out of it, but most average folk won't need the amount of dosh that's being thrown out there by the experts. The 10 years after retirement will be about the busiest time they'll have and after that the old pegs won't be doing so much, nor will they want to. I really do think that what people will need is way over estimated.


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## Jim2007 (6 Oct 2018)

joe sod said:


> You make good points but an Irish equivalent could be the collapse of the euro or break up of European union, this is actually not such an unlikely event as it came close during the financial crisis. This would be equivalent to break up of Soviet union.



This is just not even close to a realistic assumption.  The institutions have been hit very hard in the past recession and survived, furthermore additional provisions have been put in place since then in terms of structural funds higher T1 ratios and so on.  In addition Basel III and IV further strengthened pillar banks by increasing the ratios even higher.  The new T1 ratios bring most pillar banks into line with those of UBS during the crises - UBS got hit twice during the crises, once for $20b and were able to come because of their T1 ration level.



joe sod said:


> A return to a seriously devalued Irish punt would be sort of equivalent to Poland in early 90s. These do and have happened and are not to be discounted.



The opposite is most likely, any new IrishPunt would in fact become to highly valued and the ICB would have sufficient resources to defend the currency.  All through the crises Ireland remained a net exporter - you cannot remain a net exporter for long and retain a cheap currency.  At the moment both Germany and Ireland benefit greatly from the Euro - the get to traded in what to them is an undervalued currency and no expense to their exchequer.


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## Jim2007 (6 Oct 2018)

noproblem said:


> The 10 years after retirement will be about the busiest time they'll have and after that the old pegs won't be doing so much, nor will they want to. I really do think that what people will need is way over estimated.



This is not the case, the spending just focuses on other things - house conversions to accommodate disabilities, various discretionary medical costs not covered by insurance and so on.


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