There is no point in getting hysterical about taxes but the snakes and ladders of pensions are something else, writes SARAH CAREY
IT’S THAT time of year when the self-employed have to start thinking about the tax bill due on October 31st. Now I know you’ll think that the only people who pay income tax in this country are “the hard-pressed PAYE workers” because thats all you ever read about in the papers.
However, the country is teeming with equally hard-pressed workers who employ themselves and others and thus fall into the “self-assessed” bracket. As a freelance I am a member of that group so it’s time to head off to the accountant to hear the bad news.
As usual he will look at my vast income grimly and my meagre expenses in despair and start calculating. As usual he will earnestly remind me that if only I would take out a pension I could reduce my tax liability and plan for my old and doddery future. As usual I will refuse.
Judging by the outraged reaction to the Commission on Taxation I appear to be in possession of a recessive gene which renders me positively disposed towards paying tax.
It’s not that I don’t lie awake at night worrying about the final bill, or dread the knock on the door from an inspector announcing a surprise audit. Citizens pay tax. That’s what we do. In return we’re supposed to get decent public services, but I’m not the one who consistently voted for governments that reduced income taxes and blew the money paying off the public service for peace without getting reforms in return.
If that’s what the people wanted, that’s what the people got, and there’s no point having a hissy fit now when the proverbial chickens have come home to roost.
In fact, the trouble in which we find ourselves now is actually a great opportunity for reform. An annual property tax is much fairer than stamp duty and water is a scarce and expensive resource. Taxing its use is the only way to get people to preserve it.
So I’m opting out of the hysteria on the commission’s report. Death and taxes, remember?
Paying into a pension would reduce my tax liability but wouldn’t affect my cash flow so if I’m going to buy a product I want value for money.
As far as I can see pensions are a cod. I have to put in a fixed amount of money each year, but I get no guarantee whatsoever as to what I’ll get back. As those retiring now are discovering, far from transforming into one of those golf-playing, tanned tourists the pension companies assure us all OAPs should be, it’s back to bread and dripping.
What kind of a deal is that? I give you my money and you might give some of it back to me? Em, no.
Worse, once I’ve spent 30 years saving up all that money, it is handed over to a “Global Fund Manager” who promptly swipes a chunk of it every year in charges.
These PRSAs that the Government keeps trying to flog have low annual costs – just 1 per cent – but that’s the charge while you are contributing to the fund.
Once you retire and purchase the annuity, the insurance industry gravy train kicks in. I’m not prepared to make sacrifices to save money in order to pay some anonymous git to blow it on the next bull market.
Finally, every year when I start the inevitable surf around pensions websites, I’m struck by the list of rules restricting the manner in which I can draw down my funds. Let’s say when I reach 65 years of age that I am, as my genetic bloodline indicates, extremely healthy and well able to continue working. Maybe I don’t need to draw down the money and would like to keep it until I’m 80 and the nursing home beckons. My reading of the consumer-friendly websites such as Itsyourmoney.ie says that the Government will tax me as if I’m drawing down 3 per cent of the fund every year anyway.
So between the charges and the taxes, the fund will dribble away over the years until there’s nothing left by the time I need the money. Alternatively, should a crisis hit and the roof literally falls in on the house, I won’t be able to access a lump sum quickly. What use is that?
This is a bad, bad product that does not fit my needs. So yes, I’m with the three out of four women and the 50 per cent of the population that doesn’t have a private pension. Thats doesn’t mean that I’m not making arrangements for my old age. My plan is threefold.
First, spurred on by the SSIA scheme, I’m saving my own lump sum and when the world has stabilised a bit, I’ll decide for myself how I might invest that in a flexible way that will suit me.
Secondly, I despise this stereotype of the old as helpless members of society. I fully intend to soldier on productively and cheerfully – just like Garret.
And finally, I have borne two fine sons and if my husband permits and the Good Lord sees fit, I might get another one. I’m sure that with a careful mixture of indulgence and emotional blackmail, they’re bound to look after me, just as I have looked after them. I can’t trust a pension company, but I can trust my sons. Right?
