Pension top-ups failing seniors, women

The most recent governmental review of pension top-ups has left many retired people with far less than they had anticipated. Only 15% of around 11,500 cases reviewed within the last period will be receiving top-ups, leaving 10,000 people who applied for a top-up without any other option than to survive off of their same plan, despite rising prices.

This denial of pension top-ups extends beyond this small percentage of retirees. Tens of thousands of people were affected by this bad review, causing the public to go into a frenzy. Understandably so, given that everyone who has a pension is retired and between the ages of 60 and 70. Most of these people have already worked for over 40 years and have planned and saved so that they no longer have to work in the elderly stage of their lives.

Usually, people begin saving for pensions at the age of 25, paying small amounts to their retirement fund that are sometimes matched to a degree by either their current employer or the government. These plans also usually have higher …

Read More →

Preparing for retirement

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 …

Read More →

Looking at the make up of the mortgage market

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 …

Read More →

Irish Government bonds, what is happening?

Governments often have to raise money to achieve their objectives over the short and medium term, in Ireland we do this by raising bonds which is basically where a buyer (private or institutional) acts as the ‘bank’ for the state. The creditworthiness of our nation is currently the lowest in the Eurozone, below that of countries like Greece and Portugal. This means that we have to pay more interest to attract a buyer.

Today Moody’s (a rating agency) has put Ireland on watch for a debt rating downgrade (it means our debt will be considered less secure), and that means that we will have to pay even more in order to attract new investors for bonds. How this trickles down to the person on the street is simple, we’ll have to foot the bill eventually because the ultimate guarantor of state borrowing are the people in that country. The tools to achieve this with are higher taxes and less public spending, both equally unpopular.

For now we …

Read More →

Pensions Panic is Largely Unfounded

Recent turbulence in the stock markets has panicked many investors contributing to pensions funds. The stock market falls of the past three weeks have left countless investors worrying about the state of their funds and wondering if their future returns will be affected. Some are even switching funds from equities to cash. A rash move by many, and one that may have been made too soon.

With such high growth levels being experienced in the three years previous, a market correction was somewhat inevitable. It was also necessary in order to weed out the less profitable investment funds from the more established investors. For the last couple of years, Irish pension funds had grown at a rate of over 16% per annum. Growth at this rate was not sustainable, yet despite the falls of recent weeks, most pension funds are still looking healthy.

Reasons behind the buoyancy of the pensions schemes include strong equities markets in 2006 leading into 2007 and continuous increases in interest rates. Higher interest rates lead to better returns from investments such as bonds, which pensions …

Read More →