How can we rely on the State to provide pensions in the future ?

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MrEarl

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Hello,

I have been giving this a little thought of late, how we can rely (or even trust") the state to pay state pensions in the future ?

While deductions are taken at source from PAYE workers for example, to pay into a fund which in theory is saving to pay us pensions in years to come, we have already seen the State push back the earliest age for payment and we have no guarantees that this won't happen again.

Furthermore, with an aging population and alongside that some of our younger people emigrating, it is quite likely that the work force paying into the State will be significantly smaller in years to come than it is now. My understanding is that the State does not "invest" our payments now (please don't tell me the "investment" in the banks will be sufficient), for the future but instead works on the basis that future taxes and PRSI/USC payments will all be pooled and from this source, future payments will be made. If this is true, then it looks quite likely that the State won't have sufficient funds to pay it's future obligations. Is this the case ?

Ultimately, are we paying into a fund in the expectation of getting a pansion from the State that will either be far smaller than we are currently led to believe, or perhaps even a pension we can never secure payment on, given the age for qualification will have been pushed back beyond the reach of the majority etc ?
 
I think it is time Contributory Pension Recipients were considered in a different category from Social Welfare Recipients.

We are all lumped together as Social Welfare dependents. Having paid a lifetime of contributions we are receiving the benefits to which we are entitled.

I am not suggesting we have paid sufficient contributions but it is up to the government to use their expertise or some of the Expert Expensive Consultants they employ, to compute the contributions needed and to apply an appropriate, pay related amount to contributors. Perhaps a choice of contributions and benefits, could be offered.

Following the nature of World Economics it would be prudent to invest the contributions to more stable savings for the future. Paying from Day to Day income will always add to the problems.

Currently there is no reward for people who are prudent and plan their retirement income. Many of the new taxes introduced by this government make no provision for ability to pay.
Browtal
 
The State does not, and has not, put aside your pension contribution to provide a pension in the future. Your contributions are used, and were used, to pay the pensions of those receiving a pension at the time and your pension will be paid by the contribution paid by those working when you retire.

It would now be impossible politically, to ask those working to pay the current pensions AND save for their own pension. Also, it is more or less impossible to reduce current pension payments so the State will continue to fudge the issue.

This is not a problem restricted to Ireland - but a worldwide problem, at least ain the developed world.
 
jpd said:
so the State will continue to fudge the issue.

.
Click to expand...

Replace the word fudge with borrow.

MrEarl, your best bet is to have other options and not rely totally on the state pension. The no pension at 65 until 66 was wrong.
 
jpd said:
It would now be impossible politically, to ask those working to pay the current pensions AND save for their own pension.
Click to expand...

Is this not essentially what they have already done though? By providing tax incentives for people to pay into private pension plans they are basically telling people to save for their own pension.
 
I did a project on the future of State pensions as part of a college course last year. Quite simply, the Irish State will not be able to afford to pay State pensions in the future. There is no pot of money accumulating to pay your pension when you get to 66 or 68 in my case.

You need to look at providing an income for yourself in retirement but that is bloody expensive.

Governments will not address the problem as it will mean ring fencing money for future generations and politics is about the next election. They all know they'll be well gone from office before it all hits the fan.

The Australian model is probably the best model out there with mandatory pensions. When it started in 1992, there was a 3% contribution. It has gradually been increased to 12%. It will take years for anything similar to be introduced in Ireland.


Steven
www.bluewaterfp.ie
 
Bronte said:
Replace the word fudge with borrow.

MrEarl, your best bet is to have other options and not rely totally on the state pension. The no pension at 65 until 66 was wrong.
Click to expand...

Hello,

I agree with you that I am better off trying to make alternative arrangements but one key problem - the State continues to take my money, direct at source (as I'm am employee) whether I like it or not ... is there an "opt out" if I have alternative pension arrangements to provide for my retirement ? Otherwise, I'm getting hit twice, while those who are self employed are not, as I understand it.

As for the 65-66 I don't quite know what you mean by saying it was wrong, sorry ?
 
The self employed pay taxes too. PRSI is deducted on entire earnings too. It's just not deducted at source.

If there was an opt out, don't you think that everyone would do their own thing?

Your PRSI is thrown into the pot along with everything else and divvied out. It's just another tax.
 
MrEarl said:
As for the 65-66 I don't quite know what you mean by saying it was wrong, sorry ?
Click to expand...

My understanding is that there is a year whereby retiring people get zero, maybe I'm wrong.

There is no opt out of tax situation, but there is minimisation of tax. Paye system is the hardest to minimise tax. I think a bit of this and that is good, pension, savings, state pension, rental income, stocks etc. Do for myself I don't do stocks.
 
The old age pensions had always been paid at 66. For PAYE workers, there was the Transitional pension, which was paid from 65 for 1 year. That is gone with effect from 1 January 2014.




Steven
www.bluewaterfp.ie
 
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