Frozen pensions

suzieq

My partner has 2 frozen pensions from ex-employers that he doesn't know what to do with. They both have less than £1k in them. He was speaking to a colleague today, who told him that personal pensions are a waste of time, and he'd be better putting the money into a high-interest savings account of some description until he retires (he's currently 33). Is this right?

MrChips

The "colleague" is wrong on two counts.

Firstly, anyone as young as 33 who had their pension fund invested in a savings account would almost certainly have a pitiful pension upon retirement. Unless this colleague knows of a mythical "high-interest" account paying a rate equivalent to the expected return on equities?

Secondly (and perhaps more relevantly), the money invested in a pension can't be withdrawn until the age of 55 (except in a few rare circumstances like ill-health).

dunstonh

He was speaking to a colleague today, who told him that personal pensions are a waste of time, and he'd be better putting the money into a high-interest savings account of some description until he retires (he's currently 33). Is this right?

His colleague is daft.

A pension is just another tax wrapper which can contain investments just like an ISA, unit trust or investment bond can.

A savings account would have a long term average of around 3.5%p.a. but a pension invested into medium risk unit linked funds would have a long term average of around 7% p.a. Plus the pension would get tax relief added to it as well.

suzieq

That's great guys, thanks very much.
Plus, I guess if what this bloke said was true, everyone would be doing it! :rolleyes: