What are the alternatives to a personal pension?
Last week the basic state pension went up to £95.25 for a single person and £152.30 for a couple. This isn’t much, and the earliest you can get it is when you reach 65 if you’re a man (so you’d qualify if born on or before 5 April 1959) or 60 if you are a woman (born on or before 5 April 1950).
For these reasons people have been heavily encouraged to top up state provision with some private scheme. And people running their own businesses often invest in that with a view to selling it or some assets to fund retirement.
There’s an interesting article in the Observer about the pros and cons of different ways of saving for your retirement. Basically it’s saying private pension plans are not all they are cracked up to be, particularly because they are typically inflexible about when you can cash them in.
Taking control of investments yourself may be better than leaving it to a pension fund manager. Here’s an extract:
“For many years I have been very anti-pensions,” says Colin Jackson, an independent financial adviser and director at Baronworth. “Yes, you get tax relief on your contributions, which is a great incentive to invest, but when it is time to retire and the market is against you I think the technical term is: ‘You’re stuffed.’ ”
Jackson does have company pensions from over the years but says he is “bitterly disappointed” with their performance. He thinks property is a far better medium- to long-term investment, followed by Isas, with pensions at the bottom of the pile. He also says that people should look beyond residential to consider commercial property.
“Many years ago we decided to buy the building we work in,” he says. “That is now my pension.”
The article estimates that £100,000 invested in property 10 years ago would have turned into just under £221,000 now - even taking into account recent house price falls. Had that £100,000 been put into an average instant access savings account, it would have grown to £129,000 (not inflation adjusted), while it would have shrunk to a shocking £91,646 if it had been invested in an average UK-based equity fund.
What can you do if you don’t have the money to invest in anything?
Well, working till you drop may be the only option.
If you can manage to keep working beyond state pension age it’s even possible to convert the pension you would have received into a lump sum for when you eventually do retire. You don’t lose out by continuing to work.
Here’s an example from the official Pension Service site, run by the Department for Work and Pensions.
Ahmed decides to put off claiming his weekly State Pension of £105 for three years. When he finally claims his State Pension, if he chooses a lump sum, he will get a lump sum of around £18,000 (before tax) as well as his normal weekly State Pension entitlement.
You can find out how much you could get by putting off claiming your own state pension by phoning the Pension Service’s Forecasting Team on 0845 3000 168
Posted on Friday, April 17th, 2009
Under: Exit planning, Finance, Front page, Pensions | 1 Comment »


























Trying to understand the Government’s training grants system is a non-trivial task!

Though women only need to have 39 years of contributions at the moment, compared to 44 years for men, the breaks from work many women take to raise children or care for another family member means a pensions shortfall is much more common among women - 90 per cent of men get the full whack.

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Tax expert Penny Bates comments on the BBC site