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MARKET COMMENT
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Pensions seem to have got almost as many column inches as house prices in recent months. Stories about the fate of individual company pension schemes now make the headlines and we're constantly reminded of the gap between how much we are saving for retirement and how much we ought to be. We've had some Government proposals appear in the press to test the water, too. Most recently, the idea of ending the 25% tax-free lump sum and 40% relief on pension contributions have been dangled under voters' noses to see how much they retch. Ways to reform the annuity system have also been bandied about, such as allowing people to pass on some their pension pot to their descendants. It is all building up to the publication of the Government's green paper on pensions next month, in which 'far reaching changes to enable more people to build up savings for their retirement will be examined'. Yikes! Given the Government's track record of adding further layers of complexity to anything pensions or tax-related, I can't say my hopes are that high. An excellent comment from the Financial Times earlier this week sums up the problems very neatly. Despite all the fuss made about broken promises, it all boils down to the simple fact that if we expect to have a longer retirement than our parents and grandparents, then we are going to have to save more while we are working to fund it. Despite appearances to the contrary, this isn't a particularly new problem; it's just that it's only recently become widely recognised. Who actually does the saving, i.e. us, our employer or the Government, is obviously a big bone of contention, but arguably, just detail. If your employer pays more, then you'll probably end up with a lower salary than you would have got otherwise. If it's the Government, then expect higher taxes. The level, if any, of compulsion for contributions is perhaps one of the biggest hurdles yet to be jumped. For our own part though, a better understanding of how our retirement plans are progressing and how much we need to put into them remains by far and away the best approach to take. Relying on your employer or the State to look after you is just asking for trouble. They may pull through, but I'd rather not be left hanging if they don't. This article shows you how to go about it.