4Mon
Many thanks @Epi for the two posts on occupational pension schemes. I would like to make a few brief comments on why I pay large amounts into my occupational pension scheme. I limit myself to the savings phase, as nobody knows what the tax treatment will be in 10, 20, 30 years' time.
-Our occupational pension scheme is an actively managed fund that is structured similarly to the <security:n/a:LU0360863863> and generates similar returns. So on average 5-6% per year. Dynamic equity allocation, currently 50%
-My employer pays 50% on top
-I have a contribution guarantee for both my contributions and the employer's share. This means that my total return is still +50% at the end of the term, even if the fund loses money. This is one of my main reasons for taking out a company pension
-I'm a big fan of diversification and invest in pretty much everything there is. I'm prepared to give up returns in exchange for a reduction in risk
It can't compete with an MSCI World over 30 years if you only look at the return, that's clear. But which provider can seriously offer such a product with a contribution guarantee and then generate a 15% return?
-Our occupational pension scheme is an actively managed fund that is structured similarly to the <security:n/a:LU0360863863> and generates similar returns. So on average 5-6% per year. Dynamic equity allocation, currently 50%
-My employer pays 50% on top
-I have a contribution guarantee for both my contributions and the employer's share. This means that my total return is still +50% at the end of the term, even if the fund loses money. This is one of my main reasons for taking out a company pension
-I'm a big fan of diversification and invest in pretty much everything there is. I'm prepared to give up returns in exchange for a reduction in risk
It can't compete with an MSCI World over 30 years if you only look at the return, that's clear. But which provider can seriously offer such a product with a contribution guarantee and then generate a 15% return?
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4Mon
@Bein-Godik That is interesting! I would like to know more about that.
You say that you ignore the conditions of the payout phase because nobody knows the future anyway. Why is that?
Because the conditions are already laid down by law and there is a certain degree of grandfathering, even for the government.
And these conditions say that you have to pay back the entire AG shares plus the interest earned on them. The contribution guarantee is of no use to you because the contributions are only due after payment. Or do you see it differently?
So: the +50% at the end of the term should be used entirely for the contributions. If everything goes well for you, you'll receive roughly what you paid in at the end and only lose the pension points. 🤷
I'm with you on the diversification idea. But you can also implement this with your broker.
You say that you ignore the conditions of the payout phase because nobody knows the future anyway. Why is that?
Because the conditions are already laid down by law and there is a certain degree of grandfathering, even for the government.
And these conditions say that you have to pay back the entire AG shares plus the interest earned on them. The contribution guarantee is of no use to you because the contributions are only due after payment. Or do you see it differently?
So: the +50% at the end of the term should be used entirely for the contributions. If everything goes well for you, you'll receive roughly what you paid in at the end and only lose the pension points. 🤷
I'm with you on the diversification idea. But you can also implement this with your broker.
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4Mon
@Epi No, you are making the mistake that the deposit was in gross. So in the worst case, I get the value of the gross deposit as net.
In your comparisons, you assume a 7% return for the MSCI, so I can also assume a 5% return for myself. If I calculate that with 30% payout taxation, it doesn't look so bad.
In your comparisons, you assume a 7% return for the MSCI, so I can also assume a 5% return for myself. If I calculate that with 30% payout taxation, it doesn't look so bad.
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4Mon
@Bein-Godik I did not write anything else. The payment is made in gross, the difference to the net must be paid back in any case on payout, including interest income. So with a contribution guarantee, you pay back at least the employer contributions, and if you make a profit on the investment, definitely more.
Then you have to deduct the costs of the occupational pension scheme and the loss of pension points.
I would like to see the calculation showing the net amount paid into the account, including interest income and all taxes! If I have made a mistake, I would be very grateful for a specific correction. There is a lot of money involved here and the matter is complex.
Then you have to deduct the costs of the occupational pension scheme and the loss of pension points.
I would like to see the calculation showing the net amount paid into the account, including interest income and all taxes! If I have made a mistake, I would be very grateful for a specific correction. There is a lot of money involved here and the matter is complex.
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4Mon
@Epi So let's take an example:
I have paid €100/M into the occupational pension scheme for 20 years. With a €50 employer surcharge and a 5% return per annum, I end up with around €61k, of which I paid in €24k myself. If I hadn't paid this into the occupational pension scheme, I would have received approx. 14.4k net with approx. 40% deductions.
What happens now?
I have paid €100/M into the occupational pension scheme for 20 years. With a €50 employer surcharge and a 5% return per annum, I end up with around €61k, of which I paid in €24k myself. If I hadn't paid this into the occupational pension scheme, I would have received approx. 14.4k net with approx. 40% deductions.
What happens now?
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4Mon
@Bein-Godik I can also write down these figures for you. I would also need some information: what are the annual costs of your occupational pension? Normally they are around 1-4%pa. If necessary, just tell me what you have.
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4Mon
@Epi Since I can cash out over 10 or 20 years, I assume that my deductions are no more than 30%. You also assumed 30%. So the net amount of 61k is approx. 42.7k.
The costs are already included in the 5%. The fund is not public. I work for a large company in the automotive industry.
I don't lose any pension points as I have always earned above the BBG.
The costs are already included in the 5%. The fund is not public. I work for a large company in the automotive industry.
I don't lose any pension points as I have always earned above the BBG.
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4Mon
@Bein-Godik Okay. If the occupational pension costs are included in the 5%pa, then you have to exclude them in the comparison with the broker savings plan. I'll assume a reasonably favorable 2%pa then, okay?
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4Mon
@Epi As I wrote above, my aim is not to beat the MSCI with my occupational pension. Although I am sure that the example would have beaten it with 60€/month in private savings. The 14.4k became 42.7k. That's almost 200%. Especially since you also have 25% tax on your profit
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4Mon
@Bein-Godik I am interested in comparing exactly the same investment strategies, e.g. €50 savings plan in ARERO: in the occupational pension scheme (€100 from gross with repayment obligation) vs. with the broker (€50 from net).
The decisive factor is always what ends up on the table as a pension after all the financial and tax hassle. Correct?
The decisive factor is always what ends up on the table as a pension after all the financial and tax hassle. Correct?
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•4Mon
What do you actually mean by repayment obligation?
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