44 year old, looking to make up for living a feckless life

B

bobgiga

New Member
Messages
6
Personal details
Your age: 44
Partner's age if not married: 40
Number and age of children: 2 aged 7 and 11

Income and expenditure
Me: €67,000
Partner: €70,000 + bonus €23,000
Total: €160,000

Monthly take-home pay:
Me: €3,500
Partner: €3,500
Total: €7,000

Type of employment: both Employees

Employer type:
Me: public,
Partner: private

In general are you:
(a) spending more than you earn, or
(b) saving?
Saving

Summary of Assets and Liabilities
Family home value: €450,000
Mortgage on family home: €130,000
Net equity: €320,000

Me:
Cash: €33,000 (2.5% interest)

Partner:
Cash: €33,000 (2.5% interest)
Defined Contribution pension fund: €230,000
Company shares : €10,000

Total net assets:
€626,000

Family home mortgage information
Lender: Avant
Interest rate: 1.95%
Type of interest rate: fixed
Term remaining on the fixed rate: 4 years
Remaining term: 22 years
Monthly repayment: €653


Other borrowings – car loans/personal loans etc
None

Pension information
Me:
Mixed picture of public and private schemes:.
  • 1995 to 2004 Entrants Scheme: 10 years, worth ~€1000 pa
  • Small AVC from years ago that I haven’t kept up: worth €1500
  • Small PRSA from private sector employment: ~€1000
  • Single Pension Scheme: currently on this scheme, for ~10 years
Partner:
Defined contribution pension, 10% monthly and puts bonus to bring yearly contribution to 25%. Employer puts in 10%
Value of pension fund: €230,000

Buy to let properties
None

Other savings and investments:
None

What specific question do you have or what issues are of concern to you?
Marriage:
We are not married, what benefits would that bring to out situation?

Pension Q1:
My partner’s pension situation is covered pretty well. I need to sort out my own however – I would like to start an AVC or similar to increase my pension on retirement. I can go for the standard Cornmarket Civil Service AVC where the most aggressive return target is 5%. I think I have a higher level of risk tolerance.
Should I look at other options?
Can I start multiple AVCs? Say half in Cornmarket and half in a more riskier investment strategy?
What are the most cost-efficient schemes out there?
Any help there would be appreciated.

Pension Q2:
I have an old AVC and an old PRSA hanging around, both small. What to do about those, should I consolidate them in some way? Can I cash them out?

Cash on hand:
We have ~60,000 cash on hand and we’re getting a return of 2.5% interest on that currently, we would like to keep €30,000 for emergencies. So we have €30,000 on hand to do something with.

Mortgage Option:
We are on a fixed rate of 1.95% for another 4 years. We can overpay 10% each year so that’s ~12,000. And we overpaid the first two years of our current fixed rate, knocking around €15,000 a year off the capital.
Should we be looking at reducing the size of the mortgage, or the terms of the mortgage?

Investments Option
Should we be looking to invest the other €30,000 in my AVC or some other investment vehicle, like ETFs or something like that? I appreciate that the onus would be on us to research etc. on this but any general pointers or recommendations would be appreciated.
 
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Can just ask a quick question please?
Your home mortgage has an interest rate of 1.95% with 4 years remaining. That's an amazing deal.
Was it a 10-year fixed rate deal with Avant taken out I suppose before the run up in interest rates?
I see today the lowest rate from Avant is 3.4% but in fairness they are still competitive compared with other mortgage providers.
 
bobgiga said:
We are not married, what benefits would that bring to out situation?
Click to expand...
Do some research on inheritance tax and assess against how your home ownership is split if one of you were to pass away. Also the ability to be jointly assessed and share tax credits and cut offs.

Getting married does not have to equal a wedding - a basic civil one is 3 months notice and 200 EUR. Or less if you want to go to NYC and you can get it done in a couple of days for 60 USD.
 
bobgiga said:
Pension Q1:
My partner’s pension situation is covered pretty well. I need to sort out my own however – I would like to start an AVC or similar to increase my pension on retirement. I can go for the standard Cornmarket Civil Service AVC where the most aggressive return target is 5%. I think I have a higher level of risk tolerance.
Should I look at other options?
Can I start multiple AVCs? Say half in Cornmarket and half in a more riskier investment strategy?
What are the most cost-efficient schemes out there?
Any help there would be appreciated.
Click to expand...
I don't know much about this area except what I've read here on AAM, but I would definitely shop around further than Cornmarket, who don't seem to be held in very high esteem, tbh. You should be able to get a PRSA AVC from the broader marketplace.
But you're looking in the right area here - your mortgage is very well positioned so AVC's are the most valuable investment you can make now. You will have sufficient fixed-income in retirement so aim for 100% investment in a passive/indexed World Equities fund. Annual charge should be less than 1%. You need to understand that 5% return over the long-term is arguably riskier than indexed equities - most of the 5% could be consumed by charges and inflation. You can afford to ride out the inevitable market ups and downs because of your 20+ year timeframe.
 
bobgiga said:
Pension Q2:
I have an old AVC and an old PRSA hanging around, both small. What to do about those, should I consolidate them in some way? Can I cash them out?
Click to expand...
Don't cash them out, but do find out the annual charges and the type of fund they are invested in. They can potentially be consolidated/migrated to better products.
 
bobgiga said:
Cash on hand:
We have ~60,000 cash on hand and we’re getting a return of 2.5% interest on that currently, we would like to keep €30,000 for emergencies. So we have €30,000 on hand to do something with.
Click to expand...
Use it to make AVC's for 2024 and 2025 would be my suggestion.
 
With a mortgage rate of 1.95%, you should not be overpaying it.

Contribute to a pension instead. Cornmarket has huge fees, so see if there is some other way to do it. Maybe buy back years?
 
The big tax advantage of marriage is that there is no CAT on gifts or inheritances.

It may also entitle you to pension rights if your spouse dies which an unrelated person might not get.

I am told that there are some non-financial advantages and non-financial disadvantages as well, but that is above my paygrade.

Brendan
 
Brendan Burgess said:
With a mortgage rate of 1.95%, you should not be overpaying it.
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Mathematically, that's absolutely correct. It's also true that the monthly repayment is very light relative to the OP's salary, and that inflation will progressively reduce the actual burden of that repayment to the OP.

BUT the current repayment rate leaves them still paying the mortgage at 66, with maybe €50,000 outstanding when they hit 60. They'll still be paying that mortgage during a decade or more of having a kid in college which is unlikely to come cheap. Having an extra €175 odd in unavoidable weekly expenditure greatly reduces the scope available to the OP to either retire early or cut down to a shorter working week or year. They may not want to do any of those, but it's always better to put another option on the table for yourself if you can is my very strongly held position.

It also looks like the OP has probably has ample scope to max out their AVCs, invest regularly outside of their pension, and also overpay their mortgage to shorten the term and give themselves and their other half some more options down the line.

Our financial situation isn't a million miles away from the OP's and we've no particular difficulty in overpaying the mortgage, paying into our AVCs, making investments, saving cash, and having a couple of decent holidays a year.

It doesn't always have to be either/or in fairness.
 
Are you sure that your 1995-2004 pension with 10 years' service is only 1000 per annum? Are you aware of the supplementary pension for Class A public servants? Think about this before you take out an AVC. It has been my experience that the likes of Cornmarket "forget" to mention the supplementary pension when invited into workplaces to sell AVCs, sorry,talk about pensions.
 
bobgiga said:
1995 to 2004 Entrants Scheme: 10 years, worth ~€1000 pa
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That sounds odd - how is it calculated? An annual pension of €1000 after 10 years in that scheme suggests an annual salary (in today's terms) of about €20,000. Is that right?

The Ghoul said:
Are you aware of the supplementary pension for Class A public servants?
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A supplementary may be payable from 60 in that scheme but it depends on the person not being in insurable employment. Their current Single Scheme has a retirement age of 66/67 so it would only be a consideration if they were taking early retirement - quite a hit.
 
Brendan Burgess said:
Maybe buy back years?
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There doesn't seem to be any service to buy back - and the Single Scheme purchase facility is clumsy in comparison to the old option of purchasing notional service.
I suspect that the large majority of people in the Single Scheme who want to purchase extra pension benefits go the AVC route or the PRSA-AVC route (to avoid Cornmarket).

bobgiga said:
  • Small AVC from years ago that I haven’t kept up: worth €1500
  • Small PRSA from private sector employment: ~€1000
Click to expand...

If you want to you could transfer these into the Single Scheme to go towards your pension or lump sum. But I guess the AVC was linked to your old PS pension and so would be available for you to draw down at 60 if you leave it where it is.
 
Yes, good points about not being able to work while claiming the supplementary pension.

1000 does sound oddly low for the occupational. Perhaps he is basing that on the salary that he was earning in 2004 instead of correctly basing it on salary for the grade that applies now. If he was a Clerical Officer for 10 years and received increments, his final salary preserved pension would be calculated on a salary of about 40k at current rates.
 
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BIG-notorious said:
BUT the current repayment rate leaves them still paying the mortgage at 66, with maybe €50,000 outstanding when they hit 60.
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bobgiga said:
Partner's age if not married: 40
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bobgiga said:
Your age: 44
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bobgiga said:
Remaining term: 22 years
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bobgiga said:
Total: €160,000
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bobgiga said:
Mortgage on family home: €130,000
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Here is the actual schedule.

1743010113254.png

In 14 years, when the OP is 60, he will have a mortgage of about €50k and repayments of €650 a month.

I see nothing wrong with that at all. It is a small proportion of their overall income now. They are likely to be earning more by then if they have not retired early. It will be an even smaller proportion then.
 
It would be nice to clear the mortgage early and retire early on a fat pension with cash in the bank.

But they need to make choices now. And as he gets tax relief on the pension contributions now and as it will grow tax-free in the pension fund and as he will get about 25% of it tax-free on retirement, there really is no argument. And given that the interest rate is 1.95%, there really is no argument. Do not overpay the mortgage but max the pension.

This should be kept under review. In particular, when the fixed rate ends in 4 years, if interest rates are much higher than 1.95% and if the tax treatment of pension contributions is a lot less favourable, it might make sense to overpay the mortgage at that stage. I doubt it though.
 
BIG-notorious said:
Having an extra €175 odd in unavoidable weekly expenditure greatly reduces the scope available to the OP to either retire early or cut down to a shorter working week or year.
Click to expand...

It's actually the very opposite. Putting the money into a pension fund now will result in a much bigger pension fund which would result in a larger tax-free lump sum and a larger monthly pension. They can use the lump sum to clear any balance left on the mortgage if they choose to retire early.
 
Brendan Burgess said:
It's actually the very opposite.
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The OP is a public servant though- their max lump sum is 1.5 times their final salary. And they can only access that at the same time as their work pension.

Going shorter year etc provides a halfway house to retirement which will be significantly harder to access if they're still shelling out for their mortgage.

I'm absolutely not saying the OP shouldn't max out their pension or invest their savings. I'm just saying overpaying their mortgage to get rid of it sooner should be something they're also able to do and they should also do it.
 
The Ghoul said:
Are you sure that your 1995-2004 pension with 10 years' service is only 1000 per annum? Are you aware of the supplementary pension for Class A public servants? Think about this before you take out an AVC. It has been my experience that the likes of Cornmarket "forget" to mention the supplementary pension when invited into workplaces to sell AVCs, sorry,talk about pensions.
Click to expand...

Also, you started your CS pension at age 14? In 1995 and you are 44 now?
 
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