Pension alternative

dubs_2

Hi,

ive been paying into my pension since i started working 6 years ago. im now worried that this may be completely fruitless.

im a bit clueless when it comes to pensions so hope i haven't misunderstood the situation.

my problem is this- my parents (amongst millions of others) found they were not going to get the pension they thought... basically im thinking if the pension scandal has caused my long working parents to be out of pocket- what hope do i have of this not happening again when it gets to my time to collect...

therefore im looking for alternative places i could put my cash so it can in no way be taken away from me... in a savings account i simply don't have the will power to not touch it so what im looking for is an account that acts like a penion account- ie is locked until a certain date... yet will be safe no matter what happens-

anyone got any suggetsions?- im a real noob when it coms to this stuff having never found comprehensive information which answers all my questions...

dubs

dunstonh

anyone got any suggetsions?-

The product you are looking for is called a personal pension, stakeholder pension or SIPP. I think you can ignore the latter as that is for experienced advisers or where you have an IFA giving you advice.

my problem is this- my parents (amongst millions of others) found they were not going to get the pension they thought...

Nothing wrong with the product. Just the expectation of the public in expecting £20pm to give them a pension of £2000 a month in retirement.

You only get back what you put away in the first place and if you dont save/invest enough you wont get back enough.

in a savings account i simply don't have the will power to not touch it so what im looking for is an account that acts like a penion account- ie is locked until a certain date.

savings accounts would be a poor choice. Interest has rarely kept up with inflation so you would see no real growth. This is why pensions and long term investments dont use cash as a core holding.

dubs_2

thanks for this- this definitely helps!

im not too sure why my parents have not got what they expected i just know that in some cases people have paid for years and got not the return they envisaged or anything in some cases...

ive had two different pensions so far so will have to go and check that they were stakeholder or personal.

thanks again!

greg

dunstonh

im not too sure why my parents have not got what they expected i just know that in some cases people have paid for years and got not the return they envisaged or anything in some cases...

Back in the 70s, if you invested £10k, it would have grown to £40k in 10 years.
in the 80's, it would have grown to 30k.
In the 90s it would have grown to 20k.

In reality, investment returns after inflation havent much changed. Inflation has dropped a lot to what it used to run at and this makes things appear not to grow as well. However, the real value is not much different.

Over the years, the projections on pensions (or any investment) used rates to reflect what had been achieved in the past. Obviously, that wasnt happening. Also, illustrations didnt take into account inflation so people were getting examples of projections for 30 years or so terms with really big figures on them. Those really big figures are no longer really big (or even big).

In 1988 I started working in a bank and the starting salary was £3500 a year. That gives you an idea of how things have changed. Yet people who started paying into a pension at £30pm at that point havent increased their payments to keep up with inflation. You wouldnt believe how many people are still paying £50 or less into a pension and expect it to do the job.

Nowadays there are two ways to invest for retirement. Use a pension or use an ISA. Both have merits and at the end of day, a combination of the two is best. Both can invest in identical places with identical charges and there are tens of thousands of potential investment areas coverin a massive range of of areas.

Investing today is very different to how it was 5 years ago, let alone 10 and there has never been a time when the products have been so cheap but also of such high quality that is available to everyone. Information available has never been better either. As long as you take an interest in your investing and make sure its doing the best for you, then you should be fine.