General Pension advice -Quite confused

[world201812]

Private sector worker in my mid-30’s trying to get my head around pensions.

Many of the posts and threads here are very informative/helpful, but still have a few questions.

I’m in a DC scheme and appreciative of it etc but trying to get a sense of things.

As someone suggested a couple of years ago I wrote to the Department of Social Protection to get a list of my credits, what I have so far.

I got them for the year up to the end of 2014, and to add to the confusion there were years since the recession hit when I was unemployed for part of the years, say from 2010-2016ish.

For 10 of the 11 years 2004 to 2014 inclusive I have 52 weeks ‘reckonable paid contributions for pension’, while in 2011 I had 26 weeks.

2015 and 2016 I estimate I worked 11 of the 12 months, but I can check this by asking for another form from the Department of Social Protection.

• So, my questions are, how many years of full years of ‘reckonable paid contributions for pension’, are needed to get the full state contributory pension upon retirement? Is it 40?
  
  
• In the case of the year for example when I had 26 weeks contributions, is it possible to ‘buy back’ the 26 weeks outstanding so I am fully credited? If so, how, and to whom?
  
  
• At the moment it is payable at 66 I see, and will rise to 68 is that right?
  
  
• If I started paying pension contributions in 2004 when I was 21, and I need 40 years contributions to get a state pension, am I right in thinking I would in theory ‘only’ need to work until I was 61, to qualify for the full state pension?
  
  
• Then, what would happen I would either work from 61 to 68 at the time, or else claim social welfare/job seekers benefit for some of that period?

In general, if I want to look after my retirement plans, is my best option to get a job in the public sector?

I have a company DC scheme which is great, and had a separate PRSA from a previous life but when I look at the charges on the latter I was absolutely horrified.

The pensions thing is an absolute minefield. From what I can make out, as a private sector worker, you can put money away for a pension alright but there are lots of caveats there that basically say, you could end up with damn all, despite trying to plan for retirement etc.

In my employment I pay a small enough fee of 0.7% which is little compared to the PRSA charge, is the pensions levy the equivalent charge for public servants etc?

I don’t begrudge public servants any of their pension benefits, I’d say for many of them in high skill roles and when the pay is less than the private sector, thebut trying to get my head around things, and options.

Thank you.

 

[Gordon Gekko]

Done right, there are no caveats and there is no downside to funding a private pension.

0.7% is decent enough cost-wise. Why not transfer your PRSA into the company scheme? Contribute as much as you can afford to, invest it 100% in the global equity fund option, and don’t worry about stock market crashes; you are a long-term investor! Revisit things 10 years from retirement.

Remember, if you are a 40% taxapayer, it costs you €600 to put €1,000 in. Then the €1,000 compounds tax-free for a very long time. Then you draw it down on favourable terms (with a tax-free lump sum, no PRSI once you’re 66, the ability to use your 20% rate band, favourable USC post-70). And you’ve an asset to pass on to the next generation should you so wish.

 

[delfio]

I think by the time you will retire the state pension will be more than likely be history

 

[jpd]

 

[RETIRED2017]

I think by the time you will retire the state pension will be more than likely be history

Interesting how some are prepared to roll over on there belly and allow the government to cheat them out of there entitlements ,

 

[Conan]

Two separate issues here.
1. No one, no one, can predict how the State Pension will work out over the next 30+ years. The current system requires an average contribution of 48 yearly contributions over ones PRSI history. Current indications (we might know more when the Government publish an expected Pensions Framework document shortly) suggest that the Government propose to move to a Total Contribution Approach from 2020. This might require a total of 30years contributions to get the full State Pension. But whether this might change again by the time you get to retirement......well it’s impossible to say. You are simply required to pay PRSI and hope that you will get something for it in the future. The State Pension age is due to go to 68 in 2028 and I would not bet against it going higher after that.
2. As for the private sector pension, I can only suggest that you avail of what any Employer will contribute and what you can afford to contribute. With such a DC scheme it is very difficult to predict with any degree of certainty what the accumulated fund will be by retirement, what income that might provide and what the tax-free lump sum might be. You are attempting to predict future investment returns for 30+ years and how your salary will change over that period. Your pension provider can give you projections, but they are based on so many assumptions that you need to tread cautiously. But clearly, accumulating as much as possible in the DC scheme is better than doing nothing. And remember that with increasing longevity you might have to anticipate a retirement period of perhaps 25 years or more.

I have no doubt that the future will bring changes in how the State Pension is calculated. Equally we can expect to see changes in the rules surrounding private pensions. But the current taxation system offers some incentives to fund private pensions so you are probably advised to build up as much as possible in such a structure.

 

[Gordon Gekko]

You can predict that the DC fund will do very well.

 

[RETIRED2017]

Private sector worker in my mid-30’s trying to get my head around pensions.

Many of the posts and threads here are very informative/helpful, but still have a few questions.

I’m in a DC scheme and appreciative of it etc but trying to get a sense of things.

As someone suggested a couple of years ago I wrote to the Department of Social Protection to get a list of my credits, what I have so far.

I got them for the year up to the end of 2014, and to add to the confusion there were years since the recession hit when I was unemployed for part of the years, say from 2010-2016ish.

For 10 of the 11 years 2004 to 2014 inclusive I have 52 weeks ‘reckonable paid contributions for pension’, while in 2011 I had 26 weeks.

2015 and 2016 I estimate I worked 11 of the 12 months, but I can check this by asking for another form from the Department of Social Protection.

• So, my questions are, how many years of full years of ‘reckonable paid contributions for pension’, are needed to get the full state contributory pension upon retirement? Is it 40?
  
  
• In the case of the year for example when I had 26 weeks contributions, is it possible to ‘buy back’ the 26 weeks outstanding so I am fully credited? If so, how, and to whom?
  
  
• At the moment it is payable at 66 I see, and will rise to 68 is that right?
  
  
• If I started paying pension contributions in 2004 when I was 21, and I need 40 years contributions to get a state pension, am I right in thinking I would in theory ‘only’ need to work until I was 61, to qualify for the full state pension?
  
  
• Then, what would happen I would either work from 61 to 68 at the time, or else claim social welfare/job seekers benefit for some of that period?

In general, if I want to look after my retirement plans, is my best option to get a job in the public sector?

I have a company DC scheme which is great, and had a separate PRSA from a previous life but when I look at the charges on the latter I was absolutely horrified.

The pensions thing is an absolute minefield. From what I can make out, as a private sector worker, you can put money away for a pension alright but there are lots of caveats there that basically say, you could end up with damn all, despite trying to plan for retirement etc.

In my employment I pay a small enough fee of 0.7% which is little compared to the PRSA charge, is the pensions levy the equivalent charge for public servants etc?

I don’t begrudge public servants any of their pension benefits, I’d say for many of them in high skill roles and when the pay is less than the private sector, thebut trying to get my head around things, and options.

Thank you.

A post some time back almost the same ,
Public servants on the lower scales get a bad deal I may go into it later,

,there are lots of private sector workers on low wages doing well where there Employer pay a % of there pension contributions,

A lot of the pension breaks in the private sector came about because the public service used to have a very good pension not so good now so load up to the max break allowed if you can afford to,

A very well known private sector lobby group already looking for tax breaks to be cut back so they can get more out of the system

 

[Gordon Gekko]

People also forget that a State Pension of €239 a week is pretty decent for someone who was on €30k a year.

But if someone has the opportunity to fund a private pension, they should.

The “my pension did badly” stuff is a red herring; it did badly because you were invested in rubbish and/or the provider was ripping you off. Invest in global equities at 0.7% over a 30 year period and you’ll do extraordinarily well.

 

[jpd]

Interesting how some are prepared to roll over on there belly and allow the government to cheat them out of there entitlements

There are no "entitlements" as such, only promises made to the younger generation in that if they pay enough taxes to pay the current crop of pensioners, then when it is their turn the next generation will also pay taxes so that they can collect a pension at that time.

Given that the number of workers paying taxes is not increasing at the same rate as the number of pensioners collecting pensions, then something has to give - today's young workers are most unlikely to have state pensions on a par with today's

 

[RETIRED2017]

There are no "entitlements" as such, only promises made to the younger generation in that if they pay enough taxes to pay the current crop of pensioners, then when it is their turn the next generation will also pay taxes so that they can collect a pension at that time.

Given that the number of workers paying taxes is not increasing at the same rate as the number of pensioners collecting pensions, then something has to give - today's young workers are most unlikely to have state pensions on a par with today's

There are no "entitlements" as such, only promises made to the younger generation in that if they pay enough taxes to pay the current crop of pensioners, then when it is their turn the next generation will also pay taxes so that they can collect a pension at that time.

Given that the number of workers paying taxes is not increasing at the same rate as the number of pensioners collecting pensions, then something has to give - today's young workers are most unlikely to have state pensions on a par with today's

A single person aged 35 on 30000 will take home pay of 488 per week and have to live on 239 per week state pension if retiring in 2018 and full prsi contributions 49%
A single person aged 35 on 30000( paying 6000 into a private pension max allowed for a 35 year old) will have a take home pay of 396 per week and have to live on 239 state pension if retiring in 2018 and full prsi contributions,60%

if you put in the max allowed at 35 you still have a take home pay of 81% to live on

 

[Steven Barrett]

Some great advice from Gordon in this thread!! Although a small correction on the cost of pension contributions. With PRSI and USC payable on contributions, the real cost is closer to €700 for every €1,000 (dependent of USC brackets).

Concentrate on the things that you can control. And that is your private pension. Put in a decent chunk yourself and take your employer contribution. Stick it in equities but be aware that it could fall by -40% in bad times but can also grow by that amount (probably more) when recovering. Investing is a long term game, so don't look sight of that.

Monitor your plan every year to see how it fits in with your goals and adjust your plan accordingly.

A public service job is not necessarily the best job from a pension point of view as it is now based on your average salary over you whole career rather than you final salary. Also, it's a bad idea to take a job based on the pension payable in 30 years time. Do a job that you enjoy doing, not something that pays a good pension decades from now (and which also is funded by the Exchequer each year, so it too could run into problems)


Steven
http://www.bluewaterfp.ie (www.bluewaterfp.ie)

 

[Gordon Gekko]

Thanks Steven. I look at it this way:

If I stick €100 into my pension, my pay drops by €60 (€48 plus €12 USC/PRSI). So by giving up €60, I can invest €100 via my pension.

I’d be interested to see your calculation of the €70/€700, but either way the analysis is the same; people need to go down the pension route, take on sufficient risk, and be mindful of charges.

 

[RETIRED2017]

A single person at 35 earning 50000 putting the max tax break of 10000 will see there take home pay drop from E703 to E587 per week so they now have 83.5% of take home to live on,

 

[RETIRED2017]

I have met lots of people who regret putting off paying into there pension when they were younger because they listened to people trotting out the same old story wait until you are paying enough tax at 40% before starting to pay into there pension the fact is if you can cut your standard if living by 19% at 30000K you can capture the only tax break most paye taxpayers have at 35
again at 50000k if you can see your way of cutting your standard of living by 16.5% you can also capture the only tax break paye tax payers have at 35,

I am sure some of ye listened to the spokesperson calling for the tax break on pensions to be taken away so others can gate crashed the prsi fund ,

 

[world201812]

– Thanks a million for your advice. Now that I have a company scheme, my days of contributing to a PRSA with a 5% charge is long over! The latter charge blew me away. And hopefully the DC fund will go very well.

While I am a 40% taxpayer, to be honest given my modest income I was in stitches reading this ‘And you’ve an asset to pass on to the next generation should you so wish’, but point taken.

– Noted regarding the pension and its likelihood.

– Should I buy back state contributions/credits for years when I didn’t work, the 26 weeks etc? Anyone know if so, how?

 

[RETIRED2017]

– Thanks a million for your advice. Now that I have a company scheme, my days of contributing to a PRSA with a 5% charge is long over! The latter charge blew me away. And hopefully the DC fund will go very well.

While I am a 40% taxpayer, to be honest given my modest income I was in stitches reading this ‘And you’ve an asset to pass on to the next generation should you so wish’, but point taken.

– Noted regarding the pension and its likelihood.

– Should I buy back state contributions/credits for years when I didn’t work, the 26 weeks etc? Anyone know if so, how?

Leo bank of mum and dad
did you check out if the company is paying some or all of the management fees if so avc is the way to go,

For what it is worth my Work brought me into contact with lots of people on modest /average industrial wage .(36k Income in Germany Italy Austria France I can tell you there take home pay is a lot lower than in Ireland for the same type of work our state pension is lower so people in Ireland on modest wages have more money in there pocket while working and less in retirement ,

 

[RETIRED2017]

I have met lots of people who regret putting off paying into there pension when they were younger because they listened to people trotting out the same old story wait until you are paying enough tax at 40% before starting to pay into there pension the fact is if you can cut your standard if living by 19% at 30000K you can capture the only tax break most paye taxpayers have at 35
again at 50000k if you can see your way of cutting your standard of living by 16.5% you can also capture the only tax break paye tax payers have at 35,

I am sure some of ye listened to the spokesperson calling for the tax break on pensions to be taken away so others can gate crashed the prsi fund ,

– Thanks a million for your advice. Now that I have a company scheme, my days of contributing to a PRSA with a 5% charge is long over! The latter charge blew me away. And hopefully the DC fund will go very well.

While I am a 40% taxpayer, to be honest given my modest income I was in stitches reading this ‘And you’ve an asset to pass on to the next generation should you so wish’, but point taken.

– Noted regarding the pension and its likelihood.

– Should I buy back state contributions/credits for years when I didn’t work, the 26 weeks etc? Anyone know if so, how?

I don't think so Just out of interest why would you pay into some thing you have no control over if you have money put in in a fund that you control ,

 

[world201812]

Cheers Retired 2017

Under my work scheme 100% of all contributions are invested. Is this what you mean? I’m told the only charge which applies to me is an annual fund management charge of typically 0.65%.

What do you mean by ‘if so avc is the way to go’…? Why/how would I do this?

On this..

I don't think you can Just out of interest why would you pay into some thing you have no control over if you have money put in in a fund that you control

..I suppose I naively think anything guaranteed by the state is better than the ‘markets’ but as has been pointed out to me in the thread, my thought/mindset on this is wrong. Cheers

 

[RETIRED2017]

Cheers Retired 2017

Under my work scheme 100% of all contributions are invested. Is this what you mean? I’m told the only charge which applies to me is an annual fund management charge of typically 0.65%.

What do you mean by ‘if so avc is the way to go’…? Why/how would I do this?

On this..

I don't think you can Just out of interest why would you pay into some thing you have no control over if you have money put in in a fund that you control

..I suppose I naively think anything guaranteed by the state is better than the ‘markets’ but as has been pointed out to me in the thread, my thought/mindset on this is wrong. Cheers

Lots of schemes allow you to put in an AVC and you are charged the same annual fund management fee,AVC are kept seperate,