Irish Times:"Exposing a two-tier and unequal pension system" public vs. private

cremeegg if a mid ranking financial services retiree had the same DB pension as a TD they would be treated exactly the same.
The example is for the totally unreal situation of a DC punter who had accumulated enough to buy an annuity at today's ludicrous pricing
 
Deiseblue said:
Hopefully FG won't spend the proposed " Rainy Day Fund "
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Apparently FF are in favour of this Rainy Day fund, which means they are probably hoping to win the next time and have a nice pot for all sorts of spending fun & games. Where's RainyDay to comment when you need him!
 
Deiseblue said:
Oh you mean like the contributory & non contributory State pensions payable to all citizens on attaining the appropriate age ?
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Yeah I know. One thing though, the idea of a Basic Income has been knocked around for years now, but we essentially have this via the OAP

Deiseblue said:
Of course in the case of public sector workers such state pension is integrated whereas a large number of private sector workers will receive the state pension in addition to their occupational pension.
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I agree, and for those on very low incomes it's not worth much, but for anyone earning over 60k there is a big difference, which would cost a lot of money to fund privately.
 
Duke of Marmalade said:
cremeegg if a mid ranking financial services retiree had the same DB pension as a TD they would be treated exactly the same.
The example is for the totally unreal situation of a DC punter who had accumulated enough to buy an annuity at today's ludicrous pricing
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So its not that public sector pension pots are taxed differently, its just that DB pension pots are valued in such a way that a DB pot which would provide a large pension is valued less than a DC pot would provide the same pension, thus escaping the supertax.

Of course public servants have DB pensions, convenient.

You continue to represent current interest rates as "artificial" and "ludicrous" well they have been around nearly 10 years now. And I see from another thread that BOI fixed term rates for 10 years are barely above 2 year rates. So somebody expects them to be around for another 10.
 
Going forward, a multiple of 30 is applied to a DB pension accrued post-2014.

So take someone on a pension of €60k who gets a lump sum of €180k. His benefits are worth €1.98m which is fine.

I'm not convinced that overfunding is pointless. The big advantage of pensions is the gross roll up. Penalty tax is arguably a fair price to pay for having a large sum of money compounding tax-free for a very long time
 
Gordon Gekko said:
I'm not convinced that overfunding is pointless. The big advantage of pensions is the gross roll up. Penalty tax is arguably a fair price to pay for having a large sum of money compounding tax-free for a very long time
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I have done the sums. Overfunding is effectively incurring 50% tax on total fund (40% relief in and 70% deduction out). We can compare this with investing in an 8 yearly roll up fund subject to 41% exit tax. The break even point is 47 years.
 
Are you sure that you're calculations are correct?

Say I'm 35;

I'm going to overshoot €2.15m. I can invest €100 in my pension now or invest €60 in a fund. The €100 compounds tax-free for 30 years. The €60 does not (I lose 41% on income and every eight years I lose 41% on gains). Then I get hit with penalty chargeable excess tax at 65. But say I have €1m of excess monies and pay €400k of penalty tax. The €600k is still in a tax-free environment (the ARF) and can compound for thelonger of my life or my wife's life (hopefully 35 years).

Are you sure your model is right? It's only 70% tax if you exhaust your ARF.
 
Gordon Gekko said:
Are you sure that you're calculations are correct?

Say I'm 35;

I'm going to overshoot €2.15m. I can invest €100 in my pension now or invest €60 in a fund. The €100 compounds tax-free for 30 years. The €60 does not (I lose 41% on income and every eight years I lose 41% on gains). Then I get hit with penalty chargeable excess tax at 65. But say I have €1m of excess monies and pay €400k of penalty tax. The €600k is still in a tax-free environment (the ARF) and can compound for thelonger of my life or my wife's life (hopefully 35 years).

Are you sure your model is right? It's only 70% tax if you exhaust your ARF.
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Gordon Gekko said:
Are you sure that you're calculations are correct?

Say I'm 35;

I'm going to overshoot €2.15m. I can invest €100 in my pension now or invest €60 in a fund. The €100 compounds tax-free for 30 years. The €60 does not (I lose 41% on income and every eight years I lose 41% on gains). Then I get hit with penalty chargeable excess tax at 65. But say I have €1m of excess monies and pay €400k of penalty tax. The €600k is still in a tax-free environment (the ARF) and can compound for thelonger of my life or my wife's life (hopefully 35 years).

Are you sure your model is right? It's only 70% tax if you exhaust your ARF.
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Dukes model is always correct,
 
GG well you are introducing a further dimension viz. the favourable estate planning of an ARF.

Exit Tax funds compound gross over 8 year periods - both income and gains.

I assumed a gross return of 40% per octannum in doing my sums. jjm asserts that my models are always correct.

But an Exit Tax fund is a very poor comparator. Best would be a direct fund oriented towards long term capital gains.
 
Duke do you :)ever wonder why the public service way of calculating contributions are always 100% incorrect:)
Duke of Marmalade said:
GG well you are introducing a further dimension viz. the favourable estate planning of an ARF.

Exit Tax funds compound gross over 8 year periods - both income and gains.

I assumed a gross return of 40% per octannum in doing my sums. jjm asserts that my models are always correct.

But an Exit Tax fund is a very poor comparator. Best would be a direct fund oriented towards long term capital gains.
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Duke do ever wonder why the public service way of calculate contributions are always 100% incorrect
Duke of Marmalade said:
GG well you are introducing a further dimension viz. the favourable estate planning of an ARF.

Exit Tax funds compound gross over 8 year periods - both income and gains.

I assumed a gross return of 40% per octannum in doing my sums. jjm asserts that my models are always correct.

But an Exit Tax fund is a very poor comparator. Best would be a direct fund oriented towards long term capital gains.
Click to expand...
 
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