How can you save a decent enough sum of money so that you can retire and be comfortably secure that you will never have to work again? For most people, the only way to do that is through a pension and when you get your pension, to buy an annuity to give you that security.
However, more and more people are not saving into a pension. The UK savings habit seems to have died. The culture of mounting debt appears to have finally hit home but is it too late? Many people are wising up to the problem and their priority now is to pay off their debt – that means no money for saving. Your pension is probably the last thing on your list of priorities.
What’s more, people don’t like pensions any more. They distrust the pensions industry and the government. The mis-selling scandals of converting final-salary pensions into poorly performing funds, the mis-selling of endowment mortgages and information everywhere you look showing that pension funds are underperforming when compared to the FTSE 100. Doesn’t exactly fill you with confidence does it?
When Gordon Brown scrapped the share dividends in pension funds, in my opinion, it was tantamount to theft. He robbed funds of hundreds of thousands of pounds And the stakeholder pension? What a waste of time, why does he feel he has to keep changing the rules?
It seems that we are in need of a real financial boost to the pension industry and the only place we can turn to for that is the government that contributed to the problem in the first place. That and the financial services industry, which does seem to be trying to buck its ideas up somewhat. The cost of pensions is now decreasing and there is a wider choice of investment vehicles available to boost your pension pot.
I’m not sure you can look to the government for much help, there was little in this year’s Budget to help. To quote Mark Siara in his article in the Daily Reckoner this week:
“There is a vision I have of Gordon Brown, dressed in a long coat and trilby hat, standing on a street corner. He calls me over, pension problem, eh. Don’t worry, I’ve got the solution. He then hands me a folded up piece of paper before he slinks away. I open the piece of paper. It says 1, 7, 13, 23, 35, 44. It could be you.. Thanks Gordon, thanks very much”
What we need to remember is that despite all the other investments you could make aside from your pension, the temptation is there to dip into them in times of need. If you can afford to save, then start with your pension, use that as your basic needs retirement and then if you can afford it, invest in other vehicles too. Once you do get that pension pot, remember to shop around before buying your annuity. annuity rates vary wildly from one provider to another and it is vital you get the best deal for your needs.
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