Key Post How much savings do you need to feel safe

Fella

Registered User
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524
Congrats that's a great achievement , if I was a high tax payer I'd probably lash large sums into a pension , the key is starting young to benefit of compounding it seems.
 

elcato

Moderator
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3,694
Be aware also that most middle income workers (private sector) would benifit from the employer matching their 5% contribution so in effect 10% of their salary is going to the pension fund. In some places I worked the employer paid 7% on top of the 5%.
 

Codogly

Registered User
Messages
172
Two questions if i may :
1. Given the state of the national pension fund and the future population profile is there not a very real risk that a future government will need to restrict (means test) entitlement to the state pension ?
2. Does it not make a degree of sence for people to consider the risk of over providing in your pension ... i.e. you leave yourself vunerable to losing your state pension after all those years of Prsi contributions ?

" Why did RobinHood steal from the Rich ... because the poor had dame all "
 

PaddyW

Registered User
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1,268
Luckily, my employer contributes 5% on top as well as my 15% I'm contributing. I could go as high as 20% for my age, something I thought you couldn't do but is possible in Occupational pension schemes!
 

moneybox

Registered User
Messages
715
Two questions if i may :
1. Given the state of the national pension fund and the future population profile is there not a very real risk that a future government will need to restrict (means test) entitlement to the state pension ?
"

Surely if people are paying PRSI contributions all their lives, they would still be very much entitled to their State pension regardless of whatever private pension they paying into. After all the PRSI contributions are an insurance for the future.

Wouldn't it be a terrible state of affairs if they do decide to means test it and give it to someone down the road who has never ever participated in any shape or form in the workplace. I reckon they will be a lot of resentment among the better off if this ever comes to fruition. I mean why pay into an insurance fund if you never going to benefit from it, might as well pay the whole lot in taxes.
 

Codogly

Registered User
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172
mooneybox
While i agree with your views on the injustice of meanstesting the state contributory pension i am simple point out what i preceve as a possible and in my view likely future event given the likely future demands on the state pension reserve.

Because of this i would suggest that a modest occupational pension makes more sence to somewhat protect yourself from losing your hard earned contributory state pension.
 

Delboy

Registered User
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1,621
I can see means testing of the State Contributory Pension in years to come. I believe we're slowly seeing the welfare state getting wound back...look at the UK and the caps on benefits they brought in a few years back, and lowered in the last budget. What happens over there inevitably happens here
I personally would not like to be reliant on the State pension, especially if your asset rich and cash poor at the time.
 

Slim

Registered User
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2,403
...and public sector pensions {ducks for cover:eek:}.

The average Garda, for example, will retire with a pension with a fair market value of over €1.1million.

Take a public sector worker that retires at 55 with a pension of €50k per annum. A "retired" TD perhaps. That pension has a fair market value of €2.8million. No, that's not a typo.

Meanwhile back in the real world...;)

A €15k annual contribution to a pension over 35 years will get you to €1m, assuming a 3.5% compound annual growth rate, net of costs.

Do I think a real growth rate of 3.5%, net of costs, is likely on a typical balanced fund over the coming decades at current valuations?

No.

Possible certainly but not very likely.

The example of a retired TD suggests a return of approx 1.75%. Is this realistic or too conservative? The average public sector worker would retire with a pension far less than 50k, more like 25k. They do not have an ARF and their pensions die with them, apart from Spouses and Children provisions. The true cost to the state is far less than the values attributed by accounting conventions.
 

Gordon Gekko

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5,895
I pay a 0.5% management charge on my pension scheme. All other costs are met by my employer. I am 100% invested in equities and will be forever because volatility doesn't scare me. All of my projections and plans are based on an average annual return of 4.5% (i.e. 5% less 0.5%). The actual return should be 6/7%.
 

Sarenco

Registered User
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7,016
The example of a retired TD suggests a return of approx 1.75%. Is this realistic or too conservative? The average public sector worker would retire with a pension far less than 50k, more like 25k. They do not have an ARF and their pensions die with them, apart from Spouses and Children provisions. The true cost to the state is far less than the values attributed by accounting conventions.

The open market cost of the pension in my example (55 year old) was approximately €53 for each €1 of pension the last time I checked. This gives a true capital cost of €2.65m, which, when added to the expected lump sum of €150k (3 times pension), gives an open market "fair" value of €2.8m. This has nothing to do with accounting conventions.

The age of the retiree in my example is important - the open market cost of a pension for a 65 year old would be more like €37 for each €1 of pension. So, a 65 year old retiring on a pension of €25k would have an true capital cost of €925k which, when added to the expected lump sum of €75k, gives an open market "fair" value of exactly €1million.

I really don't want to drag this thread of topic - I was simply making the point that very significant numbers of "ordinary" public sector employees will retire with pension entitlements with a fair value at least €1million.
 

Sarenco

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7,016
mooneybox
While i agree with your views on the injustice of meanstesting the state contributory pension i am simple point out what i preceve as a possible and in my view likely future event given the likely future demands on the state pension reserve.

Hi Codology

I have seen this argument before and while it's certainly possible that the contributory OAP will be abolished in the future (leaving only the means-tested OAP in place), I personally think this is unlikely to happen for two key reasons:-
  • It would be complex and very costly to administer given the large numbers of retirees that would be impacted; and
  • Perhaps more importantly, the civil servants and politicians that would have to introduce the changes would be adversely affected (given the fully integrated pension arrangements now in place for post-1994 recruited public sector workers).
In my experience, Irish civil servants and politicians very rarely introduce changes to our social protection or tax codes that adversely impact them personally, without significant external pressure.

Having said that I don't think there's a snowball's chance in hell that the contributory OAP will be anything like as generous, in real terms, as is currently the case in 25 years' time when you study our demographics. I would also have serious concerns about the increased pressures on our health services and long term care provision in a rapidly ageing society.

In 25 years' time, it may not be at all pleasant to have to rely on the State for support in old age.
 

Codogly

Registered User
Messages
172
Hi Sarenco,

i agree with you view points above ... the real question i guess is : who can we provide for our future needs without exposing ourselves to more taxes / losing out via means test etc ... i.e. Where can we hide ...?
 

Slim

Registered User
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2,403
I really don't want to drag this thread of topic - I was simply making the point that very significant numbers of "ordinary" public sector employees will retire with pension entitlements with a fair value at least €1million.

...and they have contributed to the scheme as arranged in the late 70s, plus the additional 'Pension Levy' imposed in 2009. Also, public sector retirees will receive no State Pension(or it is deducted from their occupational pension). I know you don't wish to drag the thread off topic but your comments contain an inherent begrudgery element that always arises when public servants pensions are quantified in comparison with private pensions.
 

Fella

Registered User
Messages
524
...and they have contributed to the scheme as arranged in the late 70s, plus the additional 'Pension Levy' imposed in 2009. Also, public sector retirees will receive no State Pension(or it is deducted from their occupational pension). I know you don't wish to drag the thread off topic but your comments contain an inherent begrudgery element that always arises when public servants pensions are quantified in comparison with private pensions.

I'm public sector myself , I was always told the pension is terrible here , I suppose you have to account for the fact that we do not receive the state pension as it is deducted from occupational pension. The pension levy is a significant amount not sure of percentage but its a few quid each week for me.
I think it would be better in comparing pensions to deduct what the state pension would be if you where to buy it on an open market for calculations. So if you say significant numbers of "ordinary" public sector employees will retire with pension entitlements in excess of 1 million, if you never worked in your life what value has the non contributory pension ?
 

Sarenco

Registered User
Messages
7,016
...and they have contributed to the scheme as arranged in the late 70s, plus the additional 'Pension Levy' imposed in 2009. Also, public sector retirees will receive no State Pension(or it is deducted from their occupational pension). I know you don't wish to drag the thread off topic but your comments contain an inherent begrudgery element that always arises when public servants pensions are quantified in comparison with private pensions.

The notional pension contributions and the more recently introduced PRDs do not come anywhere close to reflecting the fair value of public sector pensions, which are exceptionally generous pensions by any reasonable measure.

Post-1994 recruited public sector retirees will be entitled to the contributory OAP for which they will make PRSI contributions. Just like everybody else.

I do believe that the State's pension liabilities will become unsustainable at current levels over the coming decades. That view is based on an analysis of demographic projections and has nothing to do with begrudgery as suggested.

In any event, I was simply replying to Fella's incredulity that anybody could amass pension entitlements with a value of €1million by making the simple point that very many ordinary public sector employees will retire with pension entitlements with a fair value in excess of €1million. That is hardly a controversial statement.
 

Gerry Canning

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2,505
Economy growing by 7% , unemployment dropping below 9% Tax take well-up,
.................................................................................................

Realistically Old Age Pension will always (just) keep body and soul together.

So all Pension/savings will be there for the little luxuries in life.

I think we have let ourselves get too scalded by the slump, and I think the demographics are not as hideous as posted .At worst I read OAPensions will reduce by 25%

So for anyone , they should ensure they build up as much of a fund as they can.
 

Delboy

Registered User
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1,621
Post-1994 recruited public sector retirees will be entitled to the contributory OAP for which they will make PRSI contributions. Just like everybody else.
Yes but as I understand it from my own limited pension knowledge and from having received my PS pension statement last week, the State Pension is deducted from the PS pension.
i.e. 40 yrs service = 50% of salary as pension (40/80th rule). So you go retire on final salary of say 50k....25k of that then is the notional pension, but as the OAP is currently around 12.3k, the PS pension will only pay 12.7k.
You won't get 25k PS Pension + 12.3k OAP
 

RichInSpirit

Registered User
Messages
958
How much money to feel safe?
60 million like the little old lady on the Euro millions ad maybe?
Too much money could leave you vulnerable to feeling unsafe from a security point of view unless you hire the cia or fbi to protect you. Which also has it's own headaches.
Then again being poor is no bed of roses either.
Hard one to call about how much is enough.
 

KOW

Registered User
Messages
418
Clerical officers are by a very long shot the most popular grade in the Civil Service. My wife will have 40yrs service in five years time. Current wage 36600 so pension will be 18400pa gross. There is no old age pension on top of that. Most Clerical officers currently in the service payed the same stamp during their working life.
Plenty folk living beside us and members of ethnic minority living around our town who never worked and will get a pension of approxiametly 12k p/a medical card fuel allowance etc etc. Big pension?
 
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