On the 23rd of February we looked at the very real issue of people going broke when they are advanced in years. This can be a problem due to bad investment performance for those who have pensions, having no pension and not having enough, or outliving your money – what refer to as having ‘too much month at the end of the money’.
We have suggestions, but as always, prudent planning is key.
Today on the Morning Show with Sybil & Martin we looked at flat rate expenses (covered in the Insider) and also the use of pension tax breaks. New studies found that 64% of people either didn’t know or didn’t believe that pensions had tax breaks, something we thought is worth talking about!
Most people need to work to earn an income to support their family and themselves. When we reach retirement age and stop working, this earned income stops, so naturally there is a fall off in the level of our income. Therefore making plans to replace this income, in part or whole is a priority.
There are four possible means of making provision for your retirement and these are usually referred to as the “Four Pillars”.
First Pillar – State pensions, there are two types of State Pension systems in existence. The Social Insurance System, pensions are provided as of right at the age of 66 (earliest), to individuals who have paid the required Pay Related Social Insurance (PRSI) contributions during their working lives. The Social Assistance System, pensions are provided as of right at the age of 66 (earliest) this is by way of a “means test”, so only those who can prove they have a very limited financial means and resources. An individual come only qualify for one state pensions.
Second Pillar – Private provision. Again, there two main …
Delighted to see the Central Bank getting some granular detail on our market! … Literally, we have been waiting for years to go beyond the overview figures.
We see now that 25% of Mortgages are buy-to-let’s (representing €24.6bn in lending), so almost 200,000 loans are secured for the purpose of investment, which raises an interesting taxation point when it comes to retirement.
Recent figures by the pensions board show that 40,000 fewer people are in pensions and that of the 2.1m workforce that about 800,000 have pensions; naturally this doesn’t factor in many property investors who use that as a retirement plan.
And that is where I think we’ll see some traction, people may move to paying down their debts (which they view as a retirement plan via a RIP loan) rather than putting funds into pensions. Perhaps with the changes in interest rates for many residential investment loans they are doing neither and merely trying to stay afloat.
The recent pension …
The age of retirement is going to rise, within the next five years it has to. There are several reasons, the most immediate being that the state doesn’t have the money to fund retirement at present, other factors are that people are living longer and the combined increase in health care costs to the elderly with the weight of funding pensions means one or the other has to give in eventually.
In October of 2005 Seamus Brennan gave a talk at the Merrion Hotel on the subject of the ‘Issues facing an ageing population’. The statistics are particularly relevant as they have not changed much since then.
(Excerpt) ‘The facts speak for themselves, in 2002 almost half a million people were aged 65 or over. The latest population projections suggest this may increase to 1.1 million people aged 65 and over by 2036. Right now we have almost 5 people working for every pensioner, when the demographic challenges are at their height this will decline to two workers for every pensioner. This fact has …
