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Oct 14

Are pensions worth it?

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However you may feel about pensions, it’s something we should all think about sooner rather than later. It’s never to early to plan for retirement. But are pensions worth it?

Clearly the MoneyMagpie readers are interested in this topic. In fact, you asked us what to do with your £100,000 pension pot given that the annuity rates being quoted were so bad. We’ll try to give you some answers.

It’s a good moment to evaluate pensions. Let’s take a good look at the pros and cons of private and company pensions.



Where can I get a good return on my money?

A lot of people near retirement age – or who are starting to think about taking some of their pension early – face a dilemma. Where can they get a good return for their money? 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?

The best advice we can give you is to branch out. Don’t rely on a single source of money for your retirement.


Are pensions really worth it?

Personally I’m still putting money into a couple of pensions.

Firstly, I choose a stakeholder and a SIPP (self-invested personal pension). I reckon I can make a better investment job than the ‘professionals’ which is why I’ve opened a SIPP. It’s also a good option if you have various past pensions from diverse providers – you can consolidate them into a SIPP. They bring a tax break, which is one of the biggest benefits of this type of saving for retirement. Although it’s still frustrating that pensioners have to pay tax on their income.

Secondly, as I’ve always said, it’s important to spread your bets. I put money into stocks and shares ISAs, property and alternative investments. If you’re not sure about investing, read our guide for beginners.

I do think spreading your money out is the best way forward. You never know what will come down the line. That’s particularly true with pensions since new future governments might set out new rules. That way, at least a portion of your money is protected.


How do i manage money outside pensions?

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 you a decent income in retirement. It needs to be closer to £400,000. Even that wouldn’t bring in the equivalent of the national average wage.

There’s isn’t just one simple thing to solve this. Essentially, you need to keep putting a bit away each week or month. And be bolder. Yes, put some money 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.

Useful links

For more tips on having enough money when you retire, try our articles on:

Alternatively, read more about the government’s advice on your pension.

Saving Accounts


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3 years ago

Interesting article on pensions.

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