The very mention of pensions and the lights often go out. For many it’s a problem for tomorrow so it can wait for now, but the truth is, changes are taking place under our noses that could have a dramatic effect on our futures without us even realizing.
If you have watched the news recently you can’t help to have heard of Quantitative Easing (QE) being talked about, but not really considered, or even understood, how this is going to affect us in the long term.
As if it is not enough to have suffered miserable returns from the stock markets, often insufficient to cover the cost of the people managing our fund, but now, according to a recent report by ‘The Pension Protection Fund’, the effects of QE have blown open huge holes in retirement plans.
Pension Funds invest in government bonds or gilts which offer low-to-negative real returns. The problem is that fund managers are being put under increased pressure with new solvency regulations to increase the percentage they hold in this type of investment. Its not just pensions but annuities also suffer. At present you might expect a rate just short of 6% p.a. which means you need a fund of £100K to provide you with an income of just £500 per month and that looks set to get worse.
That’s enough of the doom and gloom, so before you jump out of the window there are ways of taking control of your own destiny. Just one of those ways is to take advantage of a Self Invested Personal Pension (SIPP). This provides much greater freedom of choice and allows you to gather up existing and preserved funds from any previous pensions you might have contributed towards and transfer them into one pot. You can then choose to invest in a whole range of approved investments, many of which display double digit returns, a stark contrast to those at present that don’t even match up to the rate of inflation.
If you would like to discuss your options and take advantage of a SIPP scheme contact me here !