Agree with this, but could well be funding 20k a year in 40-50 years which might be more like 5k today.
Yep,we have to get the cost of living down or we're screwing our kids/grandkids generation and our own.
Coincidentally I got a letter this morning about the changes to our company pension. Tax and pensions,two things that no matter how hard I try,I can't understand,so I don't know what the changes are. Hopefully they're good changes
I opened a pension around the time of the last recession, I'm thinking 4 or 5 months before things went tits up. I'm not even sure which bank it was (defo one of the big 2), I remember sitting down with the fella and him telling me it was going against blue-chip companies and would be ultra secure. I stopped paying into after a few months so I would have had a fund of a couple of hundred quid. I never heard anything from anyone ever again, is that money sitting there building up a mini fortune? Could it have any kind of tax impact on my actual pension now that I need to address? My missus got a cheque from one of the banks a few years back closing her Henry the hippo savings account, her 15p was worth about €50.
Your money is there somewhere. Usually they would send out an annual statement. If you remember who it was with you should he able to track it down. If they invested it well then hopefully it's worth more than €200 or whatever you put in. No guarantee it increased faster than inflation though so your main saving was on not paying tax on it at the time probably I doubt you will be as lucky as Henry but who knows
The pension still exists, in your name, Bobby. While you can't cash it out before retirement, you can probably transfer it into your current pension, if you have another one on the go. See if you can dig out any literature on it, once you know the company that provides it, it'll be easy for them to track down, and send you out a valuation on it. If you definitely bought it through one of the two banks, then it may have been Bank of Ireland Life / New Ireland, or Ark Life (AIB). You should be getting an annual statement on it. Did you change address during the last 12 years, and maybe forget to tell them? It would be good to track it down. Whether you subsequently leave it where it is, move it to another pension company, or change the investment strategy, are all things to consider thereafter. .
Sounds like you aren't getting a choice, with regards the changes. That's usually the way it goes, with the Trustees having signed off on whatever changes are being implemented. It might be good to put a call in, and get someone to talk you through it. Sometimes the Trustees will offer to have a chat with you, other times, they'll refer you to someone in the pension company, but either way, it won't cost you anything.
Depending on the state of the country's finances, the best political will in the world may not matter. If the government of the day can't fund it, then they'll have to act. You can only raise tax so much, borrow so much, or push the pension qualifying age out so far. You are right about the cost of living, cost of housing etc. They are massive considerations, but unfortunitely, they don't really seem to appear on our Government's agenda, so they?
Its not really the case though that you can only borrow so much,especially if your society collapsing,which would happen if we had no state pension,would have a knock on effect for 27 other countries. 10 years ago people would have said we couldn't afford the type of money it would cost to bail out the banks. Last year nobody would of said we could afford to close the economy for months on end,but here we are and we're still not borrowing whats easily available to us and at a cost that's never been cheaper.Its weird we're not borrowing more now,even if its to refinance our debt and save ourselves billions in interest. We're never going to pay our debts as a nation,like many others. The debt will go up,we'll bring it down a bit,before pushing it up again and so on for as long as any of us live. The hole would always be plugged one way or another. How it impacts many other things is a different story.
It was years of negotiations with the unions. A big part of it has seen our contract hours reduced from 48 to 39 and trying to implement that across 3 separate companies was a massive undertaking. If I understand it,before only 39 of the 48 hours was pensionable,but our hours being reduced has raised our hourly rate which means our pension will be worth more,sick pay goes up too. Thats just our grade though,there's different conditions for different grades,the super annuated pension had a huge hole in it which I think saw them get screwed a bit but I'm told it worked out well for us by a mate who's been involved in it.
Report out this morning that a pension fund might lose as much as 60% of it's total value in charges abd fees over the life of the pension. That's higher than the tax you would pay on the money being just earned as income. Nothing in ireland isn't a scam when professional service companies are involved.
Have you more details on that, Ed? Something sounds a little odd there, tbh. Why would anyone bother putting money into a pension, if it was costing so much? ...and yet,so many hundreds of thousands of people do invest in pensions.
I assume he's talking about this... https://www.independent.ie/business...n-pot-being-consumed-by-charges-40328175.html Thousands of euros of pension savings are being consumed by high charges. A report has found that up to €6 out of every €10 of the final pension pot is being eaten up by fees paid to finance firms. It found that fees and charges are so high that over time they are wiping out the tax relief given to pension savers by the State. And most people do not understand just how much is being siphoned from their retirement funds by charges. The findings have prompted the Labour Party to draw up legislation that would force pension providers to be more transparent about charges. Independent research forwarded to Labour’s finance spokesperson Ged Nash found the typical fees in Ireland are extremely high. Its findings are broadly in line with a 2012 report on pension charges compiled by the Department of Social Protection, assisted by the Pensions Board, the Central Bank and PwC, which found that average fees were at least 2.18pc. The 86-page report found that on average almost a third of the value of an individual’s retirement savings can be consumed by charges. The independent pensions report calculates that the impact amounts to losses of up to 60pc of the value of the pot by retirement age. This is based on pension firms charging as much as 3pc a year on the value of the entire pension pot. Typical fees here are higher than in other countries, and low-cost, passively managed pension products are not available in Ireland. The high fees compound and over time and extract thousands of euro from the fund. The impact of charging 3pc every year on the full amount can see pension firms scooping up thousands of euro in fees. The OECD indicates every 0.25pc increase in fees results in a 4pc to 5pc reduction in the value of the final fund. The report says: “Therefore, annual fees of 3pc results in a reduction in value of the final pot of up to 60pc.” The report author cannot be publicly identified as he works for a State agency, but the findings have been verified by this publication after it was shown to experts in the area. Mr Nash said: “This independent research was provided to me and it raises major questions about the scale of pensions fees in Ireland, and it also raises major questions about the complete lack of transparency about those fees.” He said it shows how people are paying extraordinary sums of money from the pension pot they have worked hard to fill over time. “When a young person starting out in their career signs up to a pension provider, fees of 2pc or 3pc sounds small at the time, but what many don’t realise is that these fees are applied every year to the entire pension pot, which builds over time, and ends up being an eye watering sum of money.” He said the pensions industry, the Government and the Pensions Authority have questions to answer. Insurance Ireland, which was provided with a copy of the report, said it was ‘comprehensive’ and they would review it. “However, it is difficult to comment on a report without any attributed author and, at first sight, we would question some of the assumptions made in terms of pensions fees,” it added. It said its experience is that fees are much lower and this would be confirmed by the Pensions Authority report, which recognises a much broader range of fees starting at around 0.09pc to 3pc.
It's exactly what Elvis has posted below. I think the point is that they're not making it clear what the charges are so nobody knows what they're paying. I knew about the 1% flat charge per year on the total fund which is a huge number in and of itself and it is every single year but there's obviously a lot more in hidden fees.
So at what rate are pensions not worthwhile? And if that was the rate at which your company was getting is it not akin to theft if you have a mandatory pension scheme?
It's absolutely sickening that they could charge 3% of the entire savings pot year on year. With a pension timebomb coming regardless of this, this will only encourage people not to pay into pensions, making the whole thing worse. I also fear that the people who do save and give up what other people might spend (the ant and the grasshopper) are going to get fcked later asking them to pay up for the people who don't save, thereby taxing savings that you paid tax on in the first place. So you get screwed regardless.
Hi, Thanks Eric, just read that article a few minutes ago. I don't work in pensions, but I do know a bit about them, have passed a few relevant exams etc. I also deal with a lot of people in the industry. As a starting point, I can tell you that anyone paying even close to 3% pa is getting completely ripped off. My suspicion is that 3% in charges is being applied on pensions that are sold through dodgy brokers who collect big commissions for selling poor pension schemes etc. Im not saying all pension brokers are dodgy btw. Other possibilities are those with old pension schemes, possibly from previous employments. Everyone should drop an email to their pension provider and ask for a full breakdown of the charges being applied to their funds. Anyone that gets told anything near 3%should all for an immediate reduction, or look at moving their funds to another provider. Most employer based schemes are either partially funded, or often even fully funded, by the employer - so the employee pays little, or no fees.
Thanks Garrett, in my job we seem to have a fairly good pension scheme and the stewards of it seem like they do everything they can for us. I've dropped them a mail today to ask about the rates etc and if they can respond to the article. So it'll be interesting to see what they come back with.
So the problem is essentially that the whole thing compounds year on year. If you took a €5k contribution a year at 1% you're only paying a €50 in commission in the first year. By the second year you're looking at double that figure because it's charged on the total fund so without taking anything into account for fund growth due to underlying assets you'd get a situation where in 10 years that same commission is running at close to €500 per year which is now 10% of the contribution for that year and that will continue to grow as your fund does. At 3% you could easily see how this whole thing would get out of hand but as Garrett has pointed out above I think anyone getting hit with 3% is asleep at the wheel but that doesn't really make it fair that it happens. If the Govt. are going to introduce mandatory pension contributions they need to get all of this cleaned up long in advance of that because there's always companies out there willing to fleece people of their hard earned cash.
Hi Ed, There's also another (small, but important) factor to build into the calculations, and that's the performance of the pension fund. There are massive differences in the annual performance of various funds, across various pension companies. Way too many to get into in any detail here. However, my point ultimately is that a pension fund averaging (say) 6% growth per year, over the long term, charging say 2% pa (which is still high), is still doing better than a fund with 4% growth pa, with 1. 25% fees.