Start pension at age 43?

Discussion in 'Pensions' started by Foodie1, Dec 20, 2016.

  1. Gordon Gekko

    Gordon Gekko Frequent Poster

    Posts:
    1,770
    No it's not. I have always been referring to starting a pension at 43.

    Your argument is ludicrous. It's akin to not giving up smoking at 43 because "it's too late".

    22 years of tax-free compounding can do wonderful things.
     
  2. odyssey06

    odyssey06 Frequent Poster

    Posts:
    749
    Doesn't that advice count double re: a property in investment? If your circumstances change how will you afford the repayments?
     
  3. Gordon Gekko

    Gordon Gekko Frequent Poster

    Posts:
    1,770
    Last edited: Dec 21, 2016
    No there aren't.

    Say I'm 43 and a higher rate taxpayer.

    I earn €100. I end up with €48. I buy a property for €48. It generates income of €2.40 a year (5%), which nets me €1.15 after tax. Assume I leave the income in a current account paying zero interest and the property appreciates by 5% a year. At 65, it's worth €140 and I pay 33% CGT on my gain. I end up with €135 (€140 plus €25 income less €30 CGT).

    Instead, for the same cost (€48) I can divert €80 into a pension fund. The pension fund then buys a much bigger and better property for €80 which generates income of €4 a year (also 5%) on which there is no tax. At 65, the pension fund sells the property which has grown in value at the same 5% rate. There is now a total of €322 in the fund. I get 25% tax free (€81) and then liquidate my ARF (the worst outcome for an ARF) which nets me a further €126.

    €207 vs €135

    Same rental yields, same cost to me. Pension yields me 53% more.
     
    Last edited: Dec 21, 2016
    Sarenco likes this.
  4. LS400

    LS400 Frequent Poster

    Posts:
    280
    Odyssey,
    If your circumstances change, the property is still paying for itself, that's the pressure release there.
     
  5. LS400

    LS400 Frequent Poster

    Posts:
    280
    Gordon,
    You'd good with figures and can manipulate them to suit your argument any way you like.

    When I started paying quite a reasonable pensionable amount over the last 20 years, had I put the same into a property in 1996
    and had it generated 20 years rent, plus the amount that I have paid in contributions pension wise, I would be in a much better financial position than i am now.

    These are hard facts, not some financial list I cobbled together to suit my argument.
     
    moneybox likes this.
  6. LS400

    LS400 Frequent Poster

    Posts:
    280
    Also, I'm am free to change and adjust to suit my needs over the years to come.

    My future is in my hands, and I can control it.
     
  7. Fella

    Fella Frequent Poster

    Posts:
    265
    Paying into a pension makes sense if the rules don't change .
    There's going to be a massive shortfall in future years as we age as a nation , I firmly believe the government will raid private pensions like they have already to cover this shortfall so that's my main gripe with paying into a pension .
    If I was on high tax I'd pay some money into a pension but no more than 50% of what I wanted to invest , I'd manage the other 50% myself just in case they government did get stuck in with levies again which imo is more than likely .
     
  8. Gordon Gekko

    Gordon Gekko Frequent Poster

    Posts:
    1,770
    You are missing the point.

    If a 43 year old makes two investments that cost the same, one via pension and one via personal monies, and they perform the same, the difference is incredibly stark.

    €207 vs €135

    And that ignores the fact that there's a free employer pension contribution at play!

    Neglecting pension funding and investing personal monies as an alternative is bonkers.
     
  9. PyritePete

    PyritePete Frequent Poster

    Posts:
    380
    @Sarenco - I didn't start the pension at that time as I didn't want the equivalent of a 2nd mortgage give or take and decided to pay off the mortgage quicker and then I can plan what to do. For me it was a case of being in control as much as possible. If I did join the pension scheme and then after 25 odd years or so after paying into it, it just didn't make sense to me. I researched it at that time and downloaded info from the Pensions Board website. I was self-employed.

    @ Gordon - I should have written started not paying into a pension at 43. And as in any line of work, there are advisers who weren't good at their job, lets leave it like that. When I asked around at that time, would people start a pension at around the OP's age, 9 out of 10 said they wouldn't. And these were people who had started pensions donkeys years before.
     
  10. Gordon Gekko

    Gordon Gekko Frequent Poster

    Posts:
    1,770
    In the face of the biggest financial crisis the State has ever seen, a 0.75% levy (or thereabouts) was introduced.

    So what might or might not happen is hardly a reason to condemn one's self to penury.

    And don't forget that public sector pensions and pension funds are linked for the purposes of penalty taxes etc.

    A pension of €25k a year will have a capital value of €750k, so anything done to hammer the chap with €750k in his fund will have to be done to the low ranking public servant which will have that lot burning effigies outside Buswells.

    My own view is what's more likely is that the State Pension will become means tested or cease to keep pace with inflation, making it all the more important for people to provide for themselves.
     
  11. Sarenco

    Sarenco Frequent Poster

    Posts:
    3,359
    Pension rules will change in the future. Of that I have no doubt.

    So will the rules on income tax, capital gains tax, PRSI, USC, LPT, DIRT, Exit Tax, stamp duty, etc.

    We have now introduced rent control legislation - who can say for sure that we won't see the reintroduction of exchange controls in our lifetimes? Or controls on the ownership of precious metals?

    Never mind the prospect of the State failing to honour deposit guarantees the next time we have a financial emergency.

    Sure, pensions come with political risk but what doesn't? All investments are subject to political risk.

    Again, a pension is just a tax efficient investment vehicle. That's all.

    There is no particular reason to believe that pension vehicles are exposed to any greater level of political risk than any other type of investment structure.
     
    rob oyle and Gordon Gekko like this.
  12. Gordon Gekko

    Gordon Gekko Frequent Poster

    Posts:
    1,770
    Which is genuinely appalling advice. It's up there with "sure why would you wear a cycling helmet", "you're 43 and you've smoked all your adult life, why stop now", or "why start exercising now, you're 43, it's too late".

    And in any event, who in God's name would listen to 9 out of 10 punters who haven't a notion of what they're talking about?

    Why not consult with a few independent experts on a flat fee basis?

    The punter in the street hasn't a clue about this sort of stuff.
     
  13. PyritePete

    PyritePete Frequent Poster

    Posts:
    380
    @ Gordon - if I understand it correctly, you are now saying that a pension of €25 k per year...2k a month into a pension ??
     
  14. PyritePete

    PyritePete Frequent Poster

    Posts:
    380
    @ Gordon - no it is not appalling advice. these 9 out of 10 people are family & friends who started a pension and upon reflection said they wouldn't do it again. In one of my previous posts I said i consulted a financial advisor without success.

    You must be the punter in the street ;)
     
  15. PyritePete

    PyritePete Frequent Poster

    Posts:
    380
    anyway to the OP, I hope you can see that all that glitters is not gold. Good luck with your decision.
     
  16. Sarenco

    Sarenco Frequent Poster

    Posts:
    3,359
    Fair enough. That's a legitimate financial approach. I personally don't think it's the optimal approach but that's a different argument.

    However, it's a big jump from there to say that it's madness for a 43 year-old to start contributing to a pension. For all we know the OP may not even have a mortgage.
     
  17. Fella

    Fella Frequent Poster

    Posts:
    265
    I do understand that Sarenco and it's a valid point , but if I own a property and have rented it out and rules change I can decide to sell up and not bother with that investment property anymore. I feel very much locked in with a pension you can't access your money.
    If I have my money invested myself there is a huge advantage that I can access it and manage it and if needs be move it either out of the country - to another bank - to another currency etc etc .
    If the government decide to put a 1% levy on my private pension tomorrow there is nothing I can do.

    Like everything in life we don't know what will happen down the line, for me I'd rather sacrifice some tax relief and have access and control of at least part of my investments. If I was on the high tax ( which I'm not ) I would put some money in but I certainly woudnt have all my eggs in one basket , we are a small country and things can change quickly so like that i like quick access.
     
    LS400 likes this.
  18. PyritePete

    PyritePete Frequent Poster

    Posts:
    380
    We can look at it from different angles and I can also say that for me to join a pension at 43 wouldn't be optimal. Different strokes for different folks and all that.

    Maybe LS400 put it better than me and it doesn't stack up.
     
  19. LS400

    LS400 Frequent Poster

    Posts:
    280
    Sarenco,
    I have pension, and I wouldn't discourage anyone at the right age starting one.
    This is not about the risks involved in your return, as I am aware every investment carries risks.

    But I'm 100% against starting one this late in your working life.

    Certain things Gordon, are too late to start, there's no getting away from reality. I'm not talking health wise, Im talking financial wise.

    Since the op can't turn the clock back, its far better to take a different route to achieve a realistic goal, and starting a pension now is absolutely the wrong path with the choices available.
     
  20. Sarenco

    Sarenco Frequent Poster

    Posts:
    3,359
    Well, lots of folks discovered in the very recent past that they couldn't actually exit their BTL investments when things went south.

    There is nothing to stop the Government applying a levy on brokerage accounts held by Irish tax payers and preventing them from moving money overseas. Don't fool yourself into thinking otherwise.