There’s a serious question from someone who has spent the last few years promoting pensions, particularly workplace pensions, in the media and in this website!
It’s a question I’m regularly asked, particularly as recent pension news has not been great.
Then we had the question from a reader about what to do with her £100,000 pension pot, given that the annuity rates she was being quoted were so bad.
A lot of people who are coming up to retirement, or at least thinking of taking some of their pension early, are faced with a dilemma. Where can they get a good return for their money and is it worth leaving cash in a pension that really doesn’t seem to be growing at a decent rate at all?
And that’s the double whammy – many pension plans have not gone to plan and annuity rates right now are pathetic. Where do we go from here?
Personally I am still putting money into a couple of pensions – a stakeholder and a SIPP (I reckon I can make a better investment job than the ‘professionals’ which is why I’ve opened a SIPP). I like the tax break they bring – although it annoys me that pensioners still have to pay tax on their income.
On the other hand, as I’ve always said, it’s important to spread your bets so I also put money into stocks and shares ISAs, property and alternative investments. I do think it’s the only way as you never know what will come down the line and with pensions you never know what new rules future governments will make.
Importantly, though, we all need to put as much as possible into a retirement fund as we go along. Sadly, even if annuity rates were where they should be (5-6% used to be the norm) £100,000 would still not give one a decent income in retirement. It needs to be closer to £400,000, and even that wouldn’t bring in the equivalent of the national average wage.
Essentially we need to keep putting a bit away each week/month and be bolder. Yes put some in a pension – and I do think that workplace pensions are worth it… they’re a start at least – but do stocks and shares ISAs as well and look into alternative investments like collections, gold, diamonds and art. Your future self will thank you!