Auto-enrolment Universal pension scheme looms. Phase out state pension? First contributions 2021

robut

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Universal scheme looms as pension time bomb ticks .. Government to launch review of auto-enrolment and State pension

It finally looks set to be on the way, several years after other countries have sought to address their own looming pension crises by forcing people to join a private pension scheme.

When you strip out the public sector, where pension coverage is close to 100 per cent, the figure in the private sector is less than 40 per cent.

While the details are still vague, it’s expected that an auto-enrolment scheme in Ireland could provide pension coverage to about 600,000 workers, with the first contributions to be made in 2021.

Minister for Social Protection Regina Doherty has suggested an eligibility range for auto-enrolment of between about €20,000 (€384 a week) and €65,000 (€1,250 a week), but it’s understood that this will depend on the outcome of the consultation.

The National Pensions Framework, published in March 2010, suggested a contribution rate of 8 per cent of income (split 4 per cent from employees, 2 per cent from employers and 2 per cent from the exchequer), but even this is likely to be short of what’s needed in retirement.
Does it present a risk to the State pension?

Plans for auto-enrolment are not coming in isolation. They will be released in conjunction with the Government’s new “total contributions” approach to pensions. This means that you’ll get out of your State pension what you put in, in the form of PRSI contributions. It is expected that 10 years of PRSI contributions will qualify for the minimum pension, and 30 years for the full pension.

One possible concern is whether the Government could look to cut State pension benefits if an increasing part of the population now provides for their own retirement?

If it does, this would shift the burden from the State partly on to the employer and the employee.
So .. I just wonder to achieve an annual pension of around €12,000, what was formally the state pension, how much a month someone would need to put away?

Even putting away €100, €120 a month now on a private pension might get you a pension of about €3/4000 PER ANNUM.

And of course add to this the recent governments raid on the private pension funds of individuals via the private pension levy. Surely this has set a precedent that could be used again? Optically at minimum, it didnt do good to encourage anyone going forward to consider a private pension?

So there now .. thoughts on all this from PIE-ers :D
 
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Zapslaststand

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The way they are extending the age of pension entitlelment makes little difference.
 

HarshBuzz

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8% per month is obviously better than 0% - but it's still nowhere near sufficient.

20-25% of income is probably more realistic in terms of achieving a sufficient retirement income.
 

robut

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8% per month is obviously better than 0% - but it's still nowhere near sufficient.

20-25% of income is probably more realistic in terms of achieving a sufficient retirement income.
So from the average industrial wage ( around €36k or so?? ) ... how much per month contribution might that be? I understand the state and the employer would be chipping into this also ..
 

robut

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And how about people on the dole, disability and stay at home parents, single mothers etc .. I assume they will somehow be exempt from all of this?
 

HarshBuzz

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So from the average industrial wage ( around €36k or so?? ) ... how much per month contribution might that be? I understand the state and the employer would be chipping into this also ..
In my view (and obviously I don't make the rules), employers should match employee contributions up to 10% and the State should then chip in 2.5%.

So take say a 35 year old on 36k.

10% + 10% + 2.5% is 22.5%.
 

robut

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In my view (and obviously I don't make the rules), employers should match employee contributions up to 10% and the State should then chip in 2.5%.

So take say a 35 year old on 36k.

10% + 10% + 2.5% is 22.5%.
"So take say a 35 year old on 36k." - that 35 year old would be paying 10% out of his/her wage .. so €3600 per annum or €300 per month??
 

HarshBuzz

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"So take say a 35 year old on 36k." - that 35 year old would be paying 10% out of his/her wage .. so €3600 per annum or €300 per month??
A+!

You just passed Second Class maths. :p
 

robut

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More of it :(

Pension underpayment scandal leaves thousands out of pocket

Thousands of pensioners can hope for a significant increase in their income, as a massive underpayments scandal is being probed by Revenue.

Pension companies are suspected of not paying out on increases in pension payments under schemes that are supposed to cover rising prices, the Irish Independent has learned.

These schemes had been sold to thousands of people as part of their pension plans, to guard against the effects of inflation. But the failure of pensions firms to pay up has sparked a Revenue probe.
 

HarshBuzz

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:D .. Just checking and double checking :D

With all other costs I wonder how many could afford that out of €36000 annual wage??
You would get tax relief on the contributions.

The real question is can your future self afford not to contribute? Especially when contributing gets you matched employer funding.7
 

Lumpy Talbot

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No
Odds just in from the Ecclesiastical Betting Agency (Turf Accountants to the Clergy) that as soon as there is an attractive enough amount to help buy an election an Irish government will apply a levy to funds created out of the Universal Pension scheme.

Odds 11/7 on a future government raiding this pot
Odds on it being left alone are 1,000 to 1 against.

For those of you who recall Ireland having the 17th largest sovereign fund in the world up to 2007 when there was 27 billion euro in the National Pension Reserve Fund set up to counteract exactly this issue.

Mind you it was decided by Sir Dead Lenihan that Irish bank bondholders needed the money more otherwise they might have lost money on their investment.
 

HarshBuzz

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Odds just in from the Ecclesiastical Betting Agency (Turf Accountants to the Clergy) that as soon as there is an attractive enough amount to help buy an election an Irish government will apply a levy to funds created out of the Universal Pension scheme.

Odds 11/7 on a future government raiding this pot
Odds on it being left alone are 1,000 to 1 against.

For those of you who recall Ireland having the 17th largest sovereign fund in the world up to 2007 when there was 27 billion euro in the National Pension Reserve Fund set up to counteract exactly this issue.

Mind you it was decided by Sir Dead Lenihan that Irish bank bondholders needed the money more otherwise they might have lost money on their investment.
this is why we need to follow the Australian superannuation model
 
D

Deleted member 17573

Anybody know if those already on OAP will have their pension recalculated based on total contributions when the TC system is introduced, or will they continue on existing pension rate?(Personal interest declared:D)
 

HarshBuzz

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And perhaps consider legal restraints on future governments in what they can steal in order to be loved abroad.
sure, why not. Having your own superannuation account where you can see

  • what you contributed
  • what your employer contributed
  • what the State topped up
  • what charges you paid
  • what your projected retirement income will be
  • what investment growth\loss you have made

can only be a good thing though.
 

Trainwreck

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Universal scheme looms as pension time bomb ticks .. Government to launch review of auto-enrolment and State pension





So .. I just wonder to achieve an annual pension of around €12,000, what was formally the state pension, how much a month someone would need to put away?

Even putting away €100, €120 a month now on a private pension might get you a pension of about €3/4000 PER ANNUM.

And of course add to this the recent governments raid on the private pension funds of individuals via the private pension levy. Surely this has set a precedent that could be used again? Optically at minimum, it didnt do good to encourage anyone going forward to consider a private pension?

So there now .. thoughts on all this from PIE-ers :D

To buy €10,000 per annum (not inflation linked) from 65, at current pension pricing, you would need about €270,000.

If you use 40 years to save that, say from 25 up to 65, my guesstimate of how much you would need to save would be:

€7,000 per annum if you didn't want to take any risk whatsoever (or as little as possible), or
€3,000 per annum if you take a reasonable amount of risk


It would be more if you want you pension inflation linked - like you might expect your current state pension to be.
 

HarshBuzz

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To buy €10,000 per annum (not inflation linked) from 65, at current pension pricing, you would need about €270,000.

If you use 40 years to save that, say from 25 up to 65, my guesstimate of how much you would need to save would be:

€7,000 per annum if you didn't want to take any risk whatsoever (or as little as possible), or
€3,000 per annum if you take a reasonable amount of risk


It would be more if you want you pension inflation linked - like you might expect your current state pension to be.
That's to buy an annuity.

To be quite frank, anyone considering buying an annuity in the current environment should be locked up for their own safety.

ARFs are the only sensible option.
 


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