Pension - Is it worth it or not?

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world201812

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I was previously part of a DB scheme which went ‘bust’, and I have a new pension scheme/employer of late, in the private sector.

As a non-public sector employee I understand that as things stand, a private sector employee gets the state pension of €230 per week plus their employer pension, while a public servant doesn’t get the €230 per week?

My fear around the whole pension thing is putting something away that could go ‘bust’ as before, and the other concern is will the government likely ‘means test’ the pension 30 years from now?

As in if I don’t make any pension provision I might get the state pension, but, if I set-up a private pension the government could turn around and say ‘you aren’t getting the state one now’..

Would I be safer as a private sector person just stashing cash away, and not be at the whim of a change in government policy?

My concern around the means test is I know with the likes of unemployment benefits, people with savings are punished after nine months or so of a payment being received.

It seems you get punished for being ‘prudent’.
 
This topic has already been discussed at some length:-
https://www.askaboutmoney.com/threads/should-i-just-save-money-or-contribute-to-a-pension.170752/

FWIW, I don't think there is any real likelihood that the contributory State pension will be abolished entirely (leaving only the means-tested State pension). Today's civil servants and TDs will qualify for the contributory State pension and turkeys are not inclined to vote for Christmas!

Remember that post-tax savings can also get clobbered by the government of the day. For example, DIRT was increased to 41% in the wake of the financial crisis regardless of a depositor's income level.
 
It would be utterly irresponsible for any government to encourage people not to plan for their own retirement. To fund the OAP would cost c. €300,000 for a private individual. If people thought they had to reach that benchmark to get anything from the State, a huge amount of people wouldn't bother saving anything at all in case they were means tested.

Then there's the issue that PRSI is supposed to pay for your OAP (we all know it doesn't, but that's what's peddled). How are they going to justify telling someone who contributed PRSI for 40 years that they're getting nothing, while someone who spent their life on the dole gets €12,000 a year.

In Sarenco's line of turkeys not voting for Christmas, politicians tend not to bring in legislation that will see them immediately out of a job.




Steven
www.bluewaterfp.ie
 
world201812 said:
My fear around the whole pension thing is putting something away that could go ‘bust’ as before,
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A defined contribution scheme cannot go "bust" in the same way that a defined benefit scheme can. This is because a DC scheme takes your money, invests it and pays out whats left at the end. It can certainly perform poorly, but that is not the same thing as going "bust",. Also there are various investment options available to reduce the likelihood of investment losses.



world201812 said:
and the other concern is will the government likely ‘means test’ the pension 30 years from now?
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Ok, I don't know how the government will deal with the looming pensions crisis. I do know that the ratio of retirees to workers will increase in the coming years making the existing state pension, contributory or old age unsustainable. So it is quite possible that the contributory pension will be subject to some form of means testing in the future.



SBarrett said:
How are they going to justify telling someone who contributed PRSI for 40 years that they're getting nothing, while someone who spent their life on the dole gets €12,000 a year.
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This seems a naive question to me. At present those who pay PRSI for 40 years get the same pension as those who pay nothing, so we are already half way there.
 
In 25 years' time it is projected that there will be over 1.4 people aged 65 and over (roughly 22% of the projected population). Means-testing that proportion of the population would be a mammoth and very costly exercise.

It seems far more likely to me that future governments will seek to contain spiralling pension costs by some combination of the following:-
  • Reducing the tax advantages currently enjoyed by our seniors;
  • Reducing the current caps on private (tax-advantaged) pensions;
  • Reducing the level of all State pensions; and
  • Further increasing the age at which State pensions become payable.
It is certainly possible that the contributory State pension will be abolished but I personally think that is highly unlikely. Aside from the political difficulties, there are far more practical and cost effective ways of tackling or containing this issue.
 
Sarenco said:
In 25 years' time it is projected that there will be over 1.4 people aged 65 and over (roughly 22% of the projected population).
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That is the issue and it is easy to loose sight of the size of the issue when discussing some of the options.


Sarenco said:
Means-testing that proportion of the population would be a mammoth and very costly exercise.
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Any one who wants a pension has to apply and demonstrate their eligibility. This is how student grants and nursing home grants are done at present

Sarenco said:
It seems far more likely to me that future governments will seek to contain spiralling pension costs by some combination of the following:-
  • Reducing the tax advantages currently enjoyed by our seniors;
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Do you mean the additional personal allowance, are there other such advantages. This seems unlikely to make a meaningful contribution to resolving the problem
That would only have an effect when the workers contributing to pensions retired, so unless done well in advance not really relevant. Also while I dont have figures I cannot imagine that the number of people with pots large enough to pay more than the existing state pension would be significant in the context of the problem.

Highly likely even inevitable
Highly likely even inevitable
Sarenco said:
It is certainly possible that the contributory State pension will be abolished but I personally think that is highly unlikely. Aside from the political difficulties, there are far more practical and cost effective ways of tackling or containing this issue.
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You will have to try harder to convince me that you have identified them.
 
Hi Sarenco,

It will be challenging for public servants to reduce the pension cap on the basis that it affects both public and private pensioners.

Yes there's a circa £1m cap in the UK, but couples can bounce upwards of £30k into ISAs so it's not comparing like with like.

Gordon
 
cremeegg said:
You will have to try harder to convince me that you have identified them.
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Sorry Cremeegg but I really don't feel under any obligation to "try harder". I simply expressed an opinion on an open forum - I really couldn't care less if I never convinced you of anything.
 
Gordon Gekko said:
It will be challenging for public servants to reduce the pension cap on the basis that it affects both public and private pensioners.
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Absolutely agree - which is why I tried to emphasise that an effective reduction in all State pensions is likely to form part of any future effort to contain a spiralling pension bill.

There are other ways of capping pension benefits beyond reducing the SFT - for example, the tax-free lump sum ceiling could be further reduced.

But really my main point is that there are other viable options available to future governments to contain an escalating pension bill that would be (a) less politically toxic; and (b) less of an administrative nightmare, than attempting to means-test all State pensions.
 
Sarenco said:
Absolutely agree - which is why I tried to emphasise that an effective reduction in all State pensions is likely to form part of any future effort to contain a spiralling pension bill.

There are other ways of capping pension benefits beyond reducing the SFT - for example, the tax-free lump sum ceiling could be further reduced.

But really my main point is that there are other viable options available to future governments to contain an escalating pension bill that would be (a) less politically toxic; and (b) less of an administrative nightmare, than attempting to means-test all State pensions.
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The government will have no say they will be told what to do by there money masters and the turkeys will have nowhere to go unlike people who have a private pension pot built up ,my advice to the turkeys and everyone else is if possible put in the max allowed tax free into your pension the younger you start the better options you have to max your return ,


At present because of the way our public service pensions are set up Ireland has a very good tax break in place for people who set up a private pension and people should take advantage of it while it still in place,

the unspoken word reading between the lines is not only will the tax-free lump sum be removed but we will see a type of benefit in kind tax on pension payout on the part not funded by the person through there own pension contributions. I suspect this will be some kind of Self Assessment the turkeys will be sitting ducks and there masters who they have control of at present will be powerless to do anything for them,

We already seen the rehearsals when the trioka came to town the forced the government to reduce pensions by law the government could not reduce pensions belonging to the turkeys if it was challenged in the courts they turkeys would have won ,The people involved knew the people of Ireland would not stand for it so they knew better than to go down that road , When people say we have 300 bn of a unfunded pension liability at present you only have a liability if you have got the money to pay up ,Contracts are ok if the people who issued them have the money to pay,

You only have to look at other posts on this forum to see how Working taxpayers are not going to hand over there hard earned money to other people who they know are well off. We are beginning to see the results of the Government not being able to borrow to feed the turkeys and the people creating the wealth and providing the services questioning there share and the rest will have to share the crumbs between them


The working people creating the wealth and providing the services are both public and private sector on above average wages .most of the others are milking the system and can be done without.

Turkeys may not vote for Christmas but can the turkeys stop Christmas from coming,:confused:long term the people who have a pension pot will leave the sinking ship bringing there pension pot with them .there will be lots of warning signs for them to get out in time if they have a big enough pension pot built up to bring with them ,There will be lots of places where they will be welcome with there pension pots,
 
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Sarenco said:
Sorry Cremeegg but I really don't feel under any obligation to "try harder". I simply expressed an opinion on an open forum - I really couldn't care less if I never convinced you of anything.
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Well if you expect your opinions to be taken seriously you need to support them with arguments or evidence.

You have said

Sarenco said:
In 25 years' time it is projected that there will be over 1.4 people aged 65 and over (roughly 22% of the projected population). Means-testing that proportion of the population would be a mammoth and very costly exercise.
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But you have not adduced anything by way of support for this opinion.

Now in my opinion it would be easy to administer a means tested pension, but I have tried harder, I have brought some evidence to support my opinion.

cremeegg said:
Any one who wants a pension has to apply and demonstrate their eligibility. This is how student grants and nursing home grants are done at present
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I may not be correct in this opinion, but at least I have tried to provide a supporting argument.

If you just want to throw opinions out without the slightest effort to back them up thats fine, and make grumpy comments to any one who disagrees with you, thats fine too.

I will continue to try to support my opinions with evidence or argument as far as possible, and will take more seriously those other posters who make the effort to do the same.
 
cremeegg said:
Well if you expect your opinions to be taken seriously
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I have no such expectation, Cremeegg.

Again, I am not trying to convince you of anything - I simply expressed an opinion. I hope that's ok with you.
cremeegg said:
But you have not adduced anything by way of support for this opinion.
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The demographic projections come from the Centre for Aging Research and Development in Ireland (CARDI).

I would have thought it was absolutely self-evident that attempting to means-test such a significant proportion of the population would be a massive undertaking. You obviously take the view that it would be straightforward to administer but I would point out that successive governments have avoided trying to target (ie mean-test) child benefit - primarily because they know that it would be an unpopular, bureaucratic nightmare.

cremeegg said:
I have brought some evidence to support my opinion.
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You really haven't you know. That's fine by me - I'm certainly not going to be rude enough to ask you to "try harder".
 
Difficult one alright .....
One major disadvantage I see in Ireland is the unpredictability of gov policy
 
Sarenco said:
The demographic projections come from the Centre for Aging Research and Development in Ireland (CARDI).
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We seem to be in agreement on this point. Indeed I think it was I who raised it first on this thread see post 4.

Sarenco said:
I would have thought it was absolutely self-evident that attempting to means-test such a significant proportion of the population would be a massive undertaking.
Click to expand...

As I have suggested a model whereby people apply and prove eligibility, such as is used in the student grant scheme, for broadly similar numbers, could be used. While the SUSI model certainly had some initial issues, it appears to work reasonably well at present with modest resources.


Sarenco said:
I would point out that successive governments have avoided trying to target (ie mean-test) child benefit - primarily because they know that it would be an unpopular, bureaucratic nightmare.
Click to expand...

Now unpopular is a different matter, again I would agree that means testing the contributory pension would be hugely unpopular.
 
world201812 said:
I was previously part of a DB scheme which went ‘bust’, and I have a new pension scheme/employer of late, in the private sector.

As a non-public sector employee I understand that as things stand, a private sector employee gets the state pension of €230 per week plus their employer pension, while a public servant doesn’t get the €230 per week?

My fear around the whole pension thing is putting something away that could go ‘bust’ as before, and the other concern is will the government likely ‘means test’ the pension 30 years from now?

As in if I don’t make any pension provision I might get the state pension, but, if I set-up a private pension the government could turn around and say ‘you aren’t getting the state one now’..

Would I be safer as a private sector person just stashing cash away, and not be at the whim of a change in government policy?

My concern around the means test is I know with the likes of unemployment benefits, people with savings are punished after nine months or so of a payment being received.

It seems you get punished for being ‘prudent’.
Click to expand...

First off since 1995 Public servants pay prsi the same as private sector workers and get the same pension as a private sector worker they also pay into a pension to bring them up to 50% of there final or last 3 years in some cases last 10 years after 40 years service in most cases not all,There was changes around 2013 and it was changed to average wage pension is not as good

so retiring public servants who have enough years get the state pension as a person in the private sector of around 230 euro this is taken from there 50 % of final salary in other words they if they are to get a pension of 345 per week 230 is the state pension and 115 is from there employer at present the dice is loaded slightly against the private sector worker paying the same prsi this is private workers own fault for allowing this to happen,

The Workers friend Joan Burton was in charge when the dice was loaded against the private sector worker it cannot be said often enough in case Labour think we have short Memories


from 2013 on public and private sector worker who had to retire at 65 had to go on job seekers allowance which was 188 euro in 2013 leaving the private sector worker short 42 euros, the government gave the public sector back the 42 euro to bring them up to the same amount before the change so the only one to lose out was the private sector worker when Joan Burton done away with the transitional year in 2013

The reason this need to be highlighted is it will have a knock on affect long term if the government start to cut the state pension any cut in state pension will only affect private sector workers the cuts will come out of the PRSI fund and the government will make up any cut suffered by the public servant from general taxation so any future cut in the state pension only affects private sector workers having paid the same amount of prsi ,you have to admire the public sector workers for watching there corner ,Private sector workers are being led by a silk thread and being short changed they have no one to blame but them self,
 
cremeegg said:
We seem to be in agreement on this point. Indeed I think it was I who raised it first on this thread see post 4.



As I have suggested a model whereby people apply and prove eligibility, such as is used in the student grant scheme, for broadly similar numbers, could be used. While the SUSI model certainly had some initial issues, it appears to work reasonably well at present with modest resources.




Now unpopular is a different matter, again I would agree that means testing the contributory pension would be hugely unpopular.
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How can you mean test the contributory pension it will only affect the private sector worker all that will happen is every euro you cut from a public sector contributory pension on the prsi side will have to be added back out of general taxation to to bring pension back up to they same amount again I know it is going on at present small scale but it is not hurting anyone big time yet ,there will be a lot more pensioners by then ,love to see how you are going to propose getting around that problem ,
 
jjm said:
if the government start to cut the state pension any cut in state pension will only affect private sector workers... the government will make up any cut suffered by the public servant from general taxation
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This is an extremely important, made in jjm's inimitable, impenetrable style.

Public sector workers get a pension 50% of their final salary averaged over 3 years (as i understand it)

Now this is often portrayed as the state pension, for which they pay PRSI, plus a pension from their employment for which they pay contributions.

If the state pension is cut does the public sector pension from employment automatically bring them back to the 50%. I am asking if anyone knows rather than predictions as to what may happen in future.
 
Our posts seem to have crossed.

This is a very important question:

jjm said:
every euro you cut from a public sector contributory pension on the prsi side will have to be added back out of general taxation to to bring pension back up to they same amount again
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Do you know that this is the case in the existing terms of the public sector pension or are you just predicting the future.
 
cremeegg said:
This is an extremely important, made in jjm's inimitable, impenetrable style.

Public sector workers get a pension 50% of their final salary averaged over 3 years (as i understand it)

Now this is often portrayed as the state pension, for which they pay PRSI, plus a pension from their employment for which they pay contributions.

If the state pension is cut does the public sector pension from employment automatically bring them back to the 50%. I am asking if anyone knows rather than predictions as to what may happen in future.
Click to expand...

I am not sure about the new single scheme (post 2012 entrants). For Class A public servants prior to that date the maximum final pension (full service) equates to 50% of pensionable salary (usually average of final 3 years). This is inclusive of State Pension. So for a person entitled to full pension his/her final pension would consist of :Occupational Pension + State Pension = 50%. Therefore, the occupational pension component varies in relation to the State Pension level (if state pension is lower the Occ. Pension should be higher).
 
cremeegg said:
Our posts seem to have crossed.

This is a very important question:



Do you know that this is the case in the existing terms of the public sector pension or are you just predicting the future.
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this is the present position
 
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