Hopefully auto-enrolment, which is due to be introduced in 2022, will force all workers to think about saving for retirement. The experience so far in the UK seems to be largely positive - opt-out rates are running at ~10%.Your question about what they will do alternatively is more than just, but the fact that so many people are not correctly educated on financial matters (to include retirement planning), and the government is doing no where near enough to change that, means most people won't even think about the answer to your questions and instead, just stick their heads in the sand or plead ignorance.
Just out of curiosity, I did a quick search online. It looks like the average wage for a full time worker in Ireland was running at circa €46k gross, about 18 months ago (that's not to be confused with the average industrial wage, which would be lower).
I think the actual wages earned by the majority of workers in ireland is much lower than this only about 30k , the median wage in 2016 was 28500 euros, in other words in 2016 half of the working population earned less than this amount. The "average industrial wage" is also not a proper statistic because alot of workers are not included, i think agency workers and some contractors. I think the "average industrial wage" is used as a benchmark by the public sector in order to use it as the lowest benchmark for their pay . Therefore there is a vested interest in not including workers that are much lower paid in order not to lower this statistic. The cso is a public sector organisation so it is in their interest that this statistic be as high as possible, but not really the truth
The percentage of net relevant earnings only relates to the amount of tax relief allowed in any one year. Any excess over that is carried forward and allowed indefinitely against future income.
I'd like to understand this better. Could we elaborate with an example?
If the pension contribution is capped at 25% of 115K for someone in their forties, this would mean a contribution of 28,750 to get max tax relief. So what would happen if a pension contribution of 50K were made instead? Do you get tax relief on 28,750 this year and 21,250 next year?
Thanks
Stan
In theory, one could make a big contribution in the event of a massive market correction.
e.g. markets fall by 40%, and someone takes the opportunity to contribute (say) €200,000.
That's true Gordon.
But few would have €200k cash on standby.
There's a discipline to amounting that sort of cash, not alone a confidence required to be ready to put it into a market that looks like it could fall further etc.
I'm all for trying to buy a bargain, but I think the long term drip feed approach is far better suited to most who are investing long term for retirement. They'll get average prices over time, and it keeps the discipline of contributing regularly. If markets appear to be down, AVCs can be useful to try and buy equities at discounts.
Yes. Any excess contribution can be carried forward for tax relief purposes , and perhaps spread over a couple of years.
That looks like a reasonable plan.It would be great if we could have about €30000 a year from the state and Irish Life. That's after we take the lump sum from Irish Life.
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