The truly shocking cost of State pensions

Firefly said:
If you wouldn't mind could you provide the numbers for someone retiring at 65 with an annuity of 1m?
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I think I've taken up enough of my broker's time for one day! Perhaps NorthStar or SBarrett could be prevailed upon to source a quote for you.
 
Sarenco said:
PS pensions are index linked - you really need to assume that the annuity will increase in line with inflation.
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If i put in an Escalation rate it will half the starting pension payout
but I was surprised with that quote for me a 50 year old, i was expecting a lot lower
 
Hi Firefly, the figues I provided were for a man age 65 with a €1mio fund. What of the remaining variables do you want chnaged i.e. age of spouse, compounding at fixed rate ( if so what rate?) or inflating in line with inflation with an inflation cap ? etc
 
cremeegg said:
Can somebody please explain this element of the Pension details
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My understanding is that investment protection is an additional benefit whereby an annuitant's estate will receive a payment if the annuitant dies within a specified period. Obviously that additional benefit comes at an additional cost.
 
Cervelo said:
If i put in an Escalation rate it will half the starting pension payout
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The flip side is that the purchasing power of your annuity payment could be very significantly reduced in the future if your annuity payment doesn't increase in line with inflation. 40 years ago, you could buy a house for €20k in Dublin!
 
Sarenco said:
My understanding is that investment protection is an additional benefit whereby an annuitant's estate will receive a payment if the annuitant dies within a specified period. Obviously that additional benefit comes at an additional cost.
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I think the phrase "Guaranteed Term" covers that. Which still leaves me wondering what "investment protection" refers to
 
cremeegg said:
I think the phrase "Guaranteed Term" covers that. Which still leaves me wondering what "investment protection" refers to
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A "guaranteed term" refers to the minimum period during which annuity payments will be made even if the annuitant dies during that initial payout period.

"Investment protection" essentially returns the purchase price of the annuity, less whatever annuity payments have already been made, to the annuitant's estate if the annuitant dies within a specified period. In a sense, the product creates a hybrid between an annuity and an ARF.

Does that help?
 
Haven't had time in the last 2 days to delve any deeper.

The only calculator I could find online that gave the value of the fund was from New Ireland and I suspect that it isn't indexed because it's significantly cheaper than what you were quoted.

[broken link removed]



Assumptions
  • Unless otherwise indicated you are entitled to the maximum State Pension (Contributory) of currently €998 per month provided your retirement age matches the age at which the State Pension becomes payable. The State Pension becomes payable at age 66 if born on or before 31st December 1954, age 67 if born between 1st January 1955 and 1st January 1961, and age 68 if born on or after 1st January 1961 provided that you have made sufficient qualifying contributions.
  • Your monthly pension contribution increases by 3% each year up until your retirement age and is invested in a pension plan with an annual management charge of 1% and a 5% charge on each contribution. These charges are in line with the maximum Standard PRSA fees and charges.
  • The investment return before retirement is 6% per annum before charges. This rate is for illustration purposes only and is not guaranteed. Actual investment returns will vary.
  • All monetary amounts are expressed in future terms.
  • The calculations do not allow for the Government Pension Levy or any other levy or tax.
  • The annuity rate used to calculate the estimated pension is based on a post-retirement interest rate of 3% per annum and is in line with the guidelines issued by the Society of Actuaries in Ireland. In practice, the amount of pension purchased will depend on the annuity rates prevailing at the time of retirement.
  • The calculations assume that annuity payments will remain level over the term and are payable for the life of the individual subject to a minimum period of 5 years.
  • The calculations assume that no pension will be paid to your spouse/dependants in the event of your death in retirement.
  • Please note that pensions in payment are subject to tax and other duties.
  • The rate of tax relief available in practice depends on the rate of tax you actually pay. Tax relief is subject to upper limits which are based on age. There are also other Revenue conditions which apply. These have not been taken into account in the Retirement Income Calculator which is intended purely for illustration purposes only.
  • Please note that pensions and contributions to pensions are subject to approval by the Revenue Commissioners. Terms and conditions and Revenue limits apply.
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If you go to Pensionplanetinteractive.ie, you can get a annuity quote, it's where i got my Irish Life quote yesterday.
 
Páid said:
https://www.pensionplanetinteractive.ie/ppi/public/pensionChoicePersonalDetails.action
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Here's the indicative quote that I got from Irish Life when I plugged the details into that online calculator:

Annuity Details
Quote Basis: Standard
Quote Date: 07/10/2016
Interest Rate: 0.06%
Payment Frequency: Monthly
Currency: Euro
Pension Type: Compulsory Purchase

Pension Details
Available fund: €1,500,000.00
First Life Pension
Amount: €23,542.20
Second Life Pension
Amount: €11,771.10
Escalation Type: Inflation - Annual Cap
Inflation Cap: 5%
Investment Protection: No

Beneficiary Details
First Life: Joe Bloggs
DOB: 07/10/1956
Gender: Male
Second Life: Jane Bloggs
DOB: 07/10/1959
Gender: Female

Indicative Quote
Per Year:
€23,542.20 pa


Annuity Rate:
1.572%


Guarantee Period: 5 years
Commencement Date: 07/10/2016
Commission: 0%
Reversion %: 50.0
Overlap Indicator: No
 
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Sarenco.

1,500,000 by 25 years left in life = 60,000 a year .

Any point in turning fund into pension?
Am I missing something ?
 
Gerry Canning said:
Am I missing something ?
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A couple of things:-
  1. At 60 you don't know that you (or your 57 year old wife) only have 25 years of life left. It's certainly not inconceivable (particularly given advances in medical science) that the annuitant's widow could be still receiving payments in 50 years' time.
  2. You don't know what purchasing power your money will have in the future (bear in mind that the annuity payments in the above examples are index linked). As I mentioned earlier in this thread, 40 years ago you could buy a fine house in Dublin for €20k - that would barely buy a shed now!
Really my point is that State pensions (and not just public sector pensions) are far more valuable (and costly) than most people realise.
 
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