If Sean Bracken, now in his early 60s, were to write to his 25-year-old self, what would he say?
“Don’t invest in a pension!”
That’s a fairly stark message, replied Joe Duffy on today’s Liveline.
But yes, Sean stuck to his guns. Having invested in his own pension for between 12 and 15 years, and now having started to draw it down, he finds that the state pension, which he understood would supplement his private pension, is not available to him. Why?
“I was self-employed… When you are self-employed, you pay the reduced rate of PRSI and you have no choice in the matter. But when it comes to then drawing your pension that you have invested in, every single penny of income from the pension is deducted from the old-age (State) pension. So essentially, all of the money you have invested in your pension has gone to waste.”
So what’s the point, he asks? Live a little, buy a house, spend your money on other things, and just sit back and rely on the state pension. Because if you take the trouble to build a private pension, it will simply offset the State pension.
What would he have done with the money instead? Well, maybe he would have put it in the post office, or a bank account, something that simple. Or maybe just spend it in the pub. “At least you had seen something from it!”, he says.
“The pension company pay me an annuity every month of €156. When I took out my pension, I was told I was taking it out as a supplement to the old age pension, because the old age pension is very hard to make ends meet on.”
The reality, according Sean, is that every penny of that is taken off the state pension, effectively almost cancelling it out.
Now, a word of warning, readers. For anybody listening to Sean on Liveline, or reading this article, the best advice is always to consult a pensions or independent financial advisor, as each individual case should be assessed on its own merits.
But Sean is not for moving. As a previously self-employed person, his advice to his 25-year-old self would remain the same.
The issue of pensions is amongst the most serious facing not just Ireland, but most Western countries, as our populations are living longer, way beyond traditional retirement age, and the relative number of working-age people required to pay for their pensions is diminishing.
But in Ireland, as elsewhere, there is an additional factor that always sets the phones ringing in radio stations, including your national broadcaster: the sometimes divisive issue of public pensions versus private pensions. That is, pensions for public service workers, often guaranteed, versus the arguably more precarious private sector pension.
And, if you’d like a follow-up, that particular issue was played out later in the show with some passion.
Click here for more from Liveline with Joe Duffy.