Have no idea how they work. Anyone here work in that area have any advice?

Definitely a good idea to get one, getting it tax free is basically 40% free on your savings.

With regards to funds and company you chose from, the biggest this to look at is the allocation % (what % of every €100 you put in goes to your fund) and the Fund Management Charge (in my experience the lowest are best, the fancy fund managers taking 1% of your money each year aren't worth it in the long run).

It's hard not to be worried about losing your investment at some stage and ending up back at square one. But is it the case that this is very unlikely because these funds are generally so diverse?

You can chose the level of risk you are willing to take on what your pension is invested in. So if big risk isn't your thing, then you can select accordingly. 

I don't think they are obliged to contribute anything

They can set one up alright and have a portion of my salary paid into it

 

Yep, employers are obliged to facilitate a pension for you but are not required to pay into it for you.

 

And where they do contribute it can vary wildly from matching to x5 times your contribution!  

Yeah, that's it. And a lot have different pension schemes depending on your rank/role in the organisation. 

Blue collar slob, no contribution. White collar, 5% +

The pension provider (Say Aviva) will charge you a monthly/annual fee for managing your account.

Then the fund(s) you invest in will also charge you an amount - this is based on how active they are.

It’s tax efficient savings so the best thing is to pay monthly so it’s an outgoing direct debit and you are not trying to time the market.

Then you need to decide on how much risk you want to take on. 

For me I split this up - 

I have 50% in a passive US Equity index fund that costs about 10bps

And the other is in an Active global Equity fund but the cost is close to 1% each year (tbf they have generated 28% annual returns over the last 3 years)

Your best friend in the market is time. The longer you are in it the better the return.

For me personally I don’t like the passive global indexes that cover equities / bonds / cash etc (low returns) or the UK index. As I live in the UK , if the stock market goes up, my house price will reflect that so I’m already in that market.

The US market is a beast. It does have huge corrections but it’s constantly going higher .... they have cheap access to capital and they innovate like nobody else.

The US market returns are about 10% over the long term so your money doubles every 7 years. 

For my daughter I’ve started investing in Tech specific sector funds (FB, Apple, Google, Microsoft etc). She is only one so she can handle the risk. 

 

When you know what your doing it's great but when you don't people will read the above and run a mile!!! How many people would be like yourself and manage their own pension, I reckon it's very low.

 

Thank God the mainstream option is managed funds. Pick your risk appetite and off you go. 

The state pension now is 12k per year. That would be more than enough in today's terms living here if you have no debt etc

But likelihood is that there will be little or no state pensions in 30-40 years

I guess that would be about right. Say you lived 20 years after retirement age, that's 30k a year. Be grand if you have house paid for etc. 

600k would make people gulp though. 

This is where compound interest comes into play.

You need to be putting money in early - in your 20’s 30’s and 40’s so they are invested over a significant period.

Or work for in the public sector where defined benefits are gold.

 

I'm not a public servant but have a defined benefit pension. I think the cut off date for it was the day before I started in 2006 and there was even a strike to get the dozen of so of us who started the same day on to it. I had no idea at the time how important it was to get it. It's split these days 80/20 in favour of DB over DC.

Happy days ... you got in just in time.

Very rare to get that in the private sector. It’s pretty much non existent now.

My employers contributions seems to have gotten worse each time I've switched job. First job they doubled the contribution now I am down to they will match 5%. I'm currently paying 9.5% in and they pay 5%. We get tax relief on it here so it is a good saving I think.

 

I read once that that depending on when you start paying in. Take the age you start your pension and halve it. Then put this % of your pre-tax salary into your pension each year until you retire. So someone starting aged 32 should contribute 16% of their salary for the rest of their working life

 

It’s also based on 40 years service.  You can top it up if you don’t have enough contributions if you joined late say post 30.  

Pre 2013 but post 1995 a persons pension was based on their contributions and then final 3 years salary so if your average salary for the last 3 years was 40k. You would get 12k sw pension and 8k public service pension to make 20k.  You would also get a lump sump of 1 and half times your final salary which would be 60k.

Pre 1995 public servants did not pay a full stamp so they did not get the sw pension but got half their final salary in their pension so it was a public service pension of 20k. 

You need 520 weeks work minimum for any kind of contributory pension. However,  a fella who goes 40 years without working will get a fairly good pension too.

They will get the basic stage old age pension.  Approximately 12k per year or 230 per week. 

About €15 a week difference so.

Not sure what your point is.  Do you think pensioners should be living on less than 230 per week.  

The amount of people who do not work one day in their life is pretty small.  Not saying it doesn’t exist but the basis of any decent welfare share is that their is a safety net for pensioners. It is only the pretty small minded that would begrudge anyone their old age pension. 

No, I don't begrudge any worker their pension. I'd be in favour of high pensions as people pay high rates of PRSI 

I would be of the opinion that it should not match someone with full contributions. Perhaps stay the way it is but have the person with the full rate getting 300 a week. You'd have to take things into account though like disability, child rearing etc, both of which I think should be worth a stamp.

So what funds the increase to 300,  greater prsi contributions ? Longer working period possibly to 70, increasing tax on those earning over 50k 70k 100k or increasing taxing for the whole workforce.

I'd be a fan of the Scandanavian model. High taxes and we'll get high services. Although,  people were around in the 80s would tell you we had high taxes and low services.

Who knows but if I had the opportunity to not rely on it I would be relying on it.  

That’s fair enough but where would you increase the taxes and who would pay the increased taxes. 

I don't know. I'm thinking out loud I suppose. 

Mightn’t be that bad starting to think about it myself

Worse case scenario is your health deteriorates and you can’t ‘enjoy ‘ your retirement 

How did she work that one out.  The average age people die at in ireland is 82 that takes into account all the people who die young etc.   So if you retire there is a good chance you will have another 17 before you die and

Wouldnt be taking advice from her

I'd say she was talking about the life expectancies when the original state pension age was set. I think in the UK it was 65. 

I think some of the pension companies oversell the idea that you should have 50%-66% of final salary, assumeing you have mortgage paid off and kids are self-funding at that stage, but you'd still want a bit of your own fund.

Either way it's a  bit if bullsh*t info. was she trying to put people off getting a pension 😀 

The target should be some of the lads on the away trips.  Longer retired than they were working 

That boat has long sailed and it ain’t coming back 

Live life while you can and spend it on things you want to do.

 

As much as he wants to blow it all on a new car, he cant. A certain amount has to go in to an annuity.

That’s the dream.

I worked with/for this guy and he was close to 60 but was very senior and loaded.

I asked him once why he was still working as he didn’t need the money. He said it’s because he has nothing else to do. He said he was too old to go travelling or take up golf etc. He said working with younger people keeps him young. He has no real hobbies outside work.

I thought it was a bit sad really. He has a really successful career but doesn’t seem like he will enjoy his retirement....

There is a good saying:

When you are young you have the energy and time to really live but don’t have the money.

When you are working you have the energy and money to really live but don’t have the time.

When you are retired you have the money and time to really live but you don’t have the energy.

I'd love to be able to retire early and have those 10 years with not many responsibilities still a bit of health, live somewhere sunny for a few winters, get a campervan around the states, go interrailing again go golfing/cycling whatever, then slow down when I'm 70 and help minding the grandkids.

All well and good having a plan till life punches you in the face, but no harm to have the dream all the same.

Say you manage to get to €500k pension savings. If you can live off 6% of that a year, then ideally, you take €30k into your pocket each year, plus the state pension (€12k) and you've an income of €42k per years in retirement (pay tax on that). Your retirement fund (€470k remaining) will hopefully grow by 5% so you're only down to €495k or whatever. 

If you can continue to grow your fund in retirement, while living off the growth (or close to it), you'll have a nice lump sum to leave behind you too.

Jesus another mad goal to leave money behind.   f**k that live your life.  I find the Irish obsession with wills and leaving money behind for people is madness.  We saw in Kanturk what happens when that is taken to a tragic level.  

Leave your gaff behind. Mortgage free. 

Leave them the house

 

 It's very hard to plan out your life , but if you do what makes you happy it go's a long way .

Remember a yank giving me a lift many years ago saying that when he retires he is going to do all the stuff that i was doing at that time .

 I looked at him and said so Mountain climbing , surfing , shark fishing to name but a few , there was a long pause and he said "maybe" .

Live life to the full when you are young . 

 

Yep. Its called happier employees.

Tax break.

My employer matches my contribution up to 5% per payslip

Yes, equities plummet at times (which is a cheap time to be buying them as a long term investment) but they come back time and time and time again.    Its the nature of the beast.     If you are risk averse start moving small proportions to less risky (and hence less return) assets.     The age you start doing this is up to yourself, but I won't be until into my 50s.    

Don't try and time the market though, this is the only thing you will fail at!

Exactly Horsey it makes far more sense to be giving kids a few bob when they need it and you are alive to enjoy them enjoying it and you can call over to the house.  

This idea that you need to leave money behind you for your kids beyond the house you live in is madness.  

You contradict yourself later on in your next post. Give your kids a start with a contribution to a deposit when they are in their 20/30/40s 

1. Annuity - you give someone like Zurich an amount of money, and they give a fixed amount each year. If you die after 2 years, you lose the rest of it.

2. ARF - you give someone like Zurich an amount of money, and they pay out a % of it to you every year, if it's managed well you have something left to pass on (or if you die early). Potential risk is if your fund performs badly and you run it down to zero with years still to live.

The purpose isn't to pass on an inheritance, but it's a bonus (hence why 90% of people are going the ARF route these days). 

Passing on to a kid in your 60's is separate. Say you've managed to save up €600k in your pension pot, you can draw down 25% of that tax free at retirement, so have a nice €150k to give to your kids at 65 (when they're house hunting)

I must say never expected 1 penny from my parents.   People don’t know what’s around the corner and they should enjoy their life.  If you are loaded and have enough money to share with your kids go for it but leaving money after you pass on beyond your house is a missed opportunity not a bonus.  That’s money that could have been spent when you were alive. 

I have been paying the max amount into my company pension since starting at 21, I pay 6% of my salary into it which is matched by my company by 9%. 

How does that compare to others? Are people maximising the tax benefits to further top this up?

Well I don’t think this the norm for the rest of our life.  I would be planning to travel as much in my 60s as I did in my 30s. 

I am pretty sure he is talking about when he is retired Murph and has more freedom. 

No not writing them off but travel will probably be mostly 2 week holiday based or work based I suspect.  Can’t see any 3-4 week spin in Argentina or inter rail in Europe like I did in my 20s and 30s.  

As McG says yeah hopefully retired by 62/63 and be able to do the longer travel then that I did in my 20s and 30s 

I would rather my parents blew their retirement on cruises, safaris or whatever they fancy. They didn't get a penny from their folks and worked their arses off all their lives. I have heard people reference 'early inheritance' from their parents and how they plan on spending it. Does my head in!

I have also been reliably informed that the latest trend in receiving early inheritance is to have your parents pay all your supermarket and petrol bills so that you get the benefit of it now and avoid paying inheritance tax down the line. 

The main benefits are pre-tax savings and investing in funds (returns are much higher than bank account interest)

Ideally your employer should be sorting it out for you.

If you are self employed speak to a broker. You can make lump sum or regular payments before tax. 

You are late to the party starting at 40 but you still have 20+ years so get onto it ASAP. 

Your broker may scare you and tell you this amount is what you need at retirement so you should be putting X amount away each month. You need a balance. Put away what you can afford to save - you also need to live now. 

A lot depends on your profession and who you work for.

You would be in the top 1% if you started at 21 and are putting away 15% each month. You don’t need to top up any more.

I started my pension at 27 and it has ranged from 9 - 16%.

Now my company pays 6% but if I put in another 1-5% they will match it so I put in the full 5%. 

Things change, we'll see how I feel about things when I retire, but right now, I think it'd be nice to be able to get my family a start in life.

Unfortunately they are locked in. You can’t access them until retirement (In the UK you can take out 25% tax free at 55 - not sure what the rules are in Ireland).

They will remain in your company’s pension plan until then.

If you move jobs you can transfer the pension to your new companys plan or leave it as is. However you won’t be able to still contribute to your previous employers pension anymore. But your money is safe... if you move jobs a lot it’s worth moving them to a single one so you can keep track of it.

If your new company doesn’t have a plan you can set one up yourself. It’s still tax deductible but it’s more admin for you.

Except for the gambling on equity options and crypto currencies 🤣

 

Nothing wrong having a pension with a Bank. The likes of BOI & AIB will have large Insurance & Investments arms that will offer the same pension options (managed funds etc) as Zurich or anyone else.

Murph I don’t think you are reading me right.  It’s kids which will stop the 3 to 4 week internet rail or trip to South America not my age.  As I said I hope to get back to it in my 60s 😀😀😀

 

There are loads of options so well worth talking to someone, plenty of options out there. I'm not saying go down the route of a pension backed mortgage (which have been a disaster for people on their PDH's and IMO sought by wealthy people out of greed) but there's more to it than paying a couple of hundred in every month, not paying any attention and hoping for €500k when you hit 65.

I think that’s the point I would rather shoot myself than not have interests and hobbies such as long haul travel. Even ever Ireland game would be a nice dent in your 60s.  Surely you can think of something for yourself you can spend it on. 

What happens if you've an emergency and need quick access to cash? 

Pay some of mine into a fund every month, only just joined but its grown at 10 %+ last few years, can access it as needed, can transfer it across to the pension as well if feel the lump sum saved is enough

Can get tax relief on the transfer too as I don't pay the max allowed into the pension 

Savings has always been part of my expenditure. Some people save what is left over after a month, I prefer to save first, then spend what I have left. I find when I "save the leftovers", I invariably end up finding some crap to spend it on.

You make it sound like it's either do things in your 30's or do things in your 60's. I'm advocating both.

 

Pension funds can not be accessed until retirement.