Procrastinating on your pension

Let’s face it, when the recession hit, cuts were made by farming families across the country. When it came to pensions, many readers may have made the decision to hold back on payments while they weathered the storm. Alternatively, perhaps you were a young worker just out of college and decided to put the idea of a pension on the long finger. Well, it is nearly 10 years since the recession first started to show its ugly face – but how has your pension fund (or lack thereof) been performing in that time?

Workers, particularly those in their 30s, who began their career at the start of Ireland’s last recession, might at this stage have halved their retirement pot potential by stalling starting a pension.

Figures obtained from Clear Financial demonstrate just how significant the impact could be. Let’s take John Murphy, for example, who is working in agribusiness. He earns €30,000 and makes a pension contribution of €100, which, due to his tax refund, is costing him €80. He was 25 when the recession hit and now at 35, his pension pot is almost at €275,000 if he is to retire at 68. If he hadn’t started then, and only started now, the pot at the same age would be €140,000, half of what it could have been.

Let’s look at an older individual, Jane McCarthy. She is 55 and started to contribute to her pension fund at 45. Now it will be worth €65,000 upon retirement at 68 – but if she was to only start now, she would be looking at a fund of €25,000.

Commenting on the figures, Michael Keating, QFA and senior financial adviser at Clear Financial said: “Based on a number of assumptions, your pension pot is halved for every 10 years you put it off. The calculations show how vulnerable you would be if you put off starting a pension until you reach middle age. Could you live for 20 plus years on €25,000 or even €65,000?”

These figures aren’t there to scare people or make anyone feel guilty if they haven’t started, it’s more to show how the longer you put off pension savings, the bigger the impact. And farmers, as well as others who are self-employed, are more at risk than those in the public sector or people working for larger employers.

The latter group typically enrols in a pension in their 20s, usually within three years of joining the company, while the self-employed typically don’t start saving into a pension until they reach anywhere between 35 and 45.

When it comes to starting a pension, putting it off until you can afford it means it may never happen. Michael says: “It’s much better to start a pension saving fund and put what little bit you can in, rather than to wait until you can afford big contributions to open a fund.

“One of the greatest hurdles of pension planning is actually beginning the savings habit. Once that’s done, you are much more likely to increase contribution rates when you are in a position to do so,” he encourages.

A radon reality

When it comes to buying a house, there are a lot of factors to consider. Radon isn’t always high on the list of considerations, but it will be in the future, as three questions relating to radon gas will now be in the Environmental Protection Agency’s 2017 Conditions of Sale document used during the sale of homes.

Radon is a naturally occurring radioactive gas linked to lung cancer. It is formed in the ground by the radioactive decay of uranium, which is present in all rock and soil. Radon is an invisible gas with no smell or taste, therefore it can only be measured with special detectors.

Joe Thomas of the Law Society of Ireland, said: “Radon gas can accumulate in buildings to levels which can be a risk to health. With a view to protecting the public and prospective home buyers, we have included radon specifically in the new edition of the Conditions of Sale document to assist in heightening awareness of the dangers of this radioactive gas.”

The revised document means that the vendor’s solicitor will ask the vendor the following questions:

This information will then be passed on to the buyer’s solicitor. If the buyer has any concerns, their solicitor will advise that they get expert advice. There is, however, no requirement for a homeowner to test or remediate their home for radon before selling it.

Homes in some parts of the country are more likely to have a radon problem, and if this is something you are concerned about, you can check out the EPA’ s interactive map at www.epa.ie/radiation/radonmap.

Inking costs

How often have you put off printing a document in the farm office because of the price of ink? We don’t blame you, the price of ink can be extortionate. However, HP recently launched a new service which, if you are partial to printing, could control your costs in the long term.

HP Instant Ink is a monthly subscription for a flat rate, based on how many pages people typically print per month. There are three monthly pricing options available in Ireland – €2.99 for a 50-page plan; €4.99 for a 100-page plan and €9.99 for a 300-page version.

Customers also won’t be left with blank pages, as HP Instant Ink automatically detects when levels are running low and orders a replacement cartridge, delivered through the post.

The cost of ink and delivery is included in the monthly plan price, while HP also provides pre-paid envelopes to return used cartridges for recycling through the HP Planet Partners programme.

It’s not the cheapest service, but at least you are able to control costs and put a fixed amount into your monthly budget.

Life insurance for renters

Many farming families own their house, but for other family members, who may be living in cities, renting is a very real way of life. Rents across the country are now 8% higher on average than their Celtic Tiger peak in 2008. In Dublin, it’s increased even higher, by an average of 13.7%, with €1,855 a month as the average rent in South County Dublin.

Irish house prices are forecast to rise by up to 5% during 2017 and the first half of 2018, which means that many families may be renting for a long time to come. This leaves those families in long-term rental accommodation in a potentially precarious position.

Much work is still needed by the Government to create a viable and sustainable rental sector, but in the meantime, consumers also need to protect themselves, similarly to mortgage holders.

Joe Charles head of proposition at Royal London says: “Those who are renting long-term should consider doing something similar to those with a mortgage, and put life and/or specified serious illness cover in place, to ensure their rent and other ongoing expenses will continue to be paid for their family, should anything happen to them.”

For many who are renting, buying a home is beyond their means at this moment in time, so you may be wondering where exactly they are going to find the extra cash. However, it is worth considering that if the main breadwinner was to fall sick, or die, their family may not be in position to continue to pay their rent, as they do not have financial protection in place.

Prices vary but, for example, a couple renting a three-bed house in Cork with an average rent of €1,100 would be looking at a premium of €18 per month to cover rent for 10 years, if something were to happen. Given that renting is a long term solution now for many families, it may be something worth looking at further.