Pensions are under attack again.
It's that time of year again. Every six months now, with the Budget and the Autumn statement, the financial press speculates on measures that will hit the pockets of the prudent at the expense of the profligate.
This time around the fear is that on Wednesday the Chancellor will either reduce the total tax-free amount that can be contributed into a pension each year from its current £50,000 -- a measure that would hit relatively few -- or else remove higher-rate tax relief on pension contributions altogether. That would hurt many more.
The threats to pension relief could just be political stage-management, but they are plausible. If you're a higher-rate tax-payer planning to make contributions into your pension, it may be worth doing so before Wednesday.
That means moving fast. But online SIPP providers make the process simple and quick. And in any case, whether pension relief is changed or not, it's sensible for most people to save through tax-efficient vehicles such as SIPPs and ISAs.
Instant portfolio
What to invest in? Well here's my pick of five shares to make an instant portfolio. I think it's better than a traditional tracker fund -- I'll explain why later.
Pick 1: Vodafone
The mobile phone operator is in a sector that has taken on the characteristics of a utility -- ownership of a mobile phone is seen by many as a necessity, if not actually a human right. Vodafone's (LSE: VOD) shares yield 6%, thanks to a prodigious cash machine and its booming 45% US associate. It's investing to grow its data and emerging markets revenues, which will support a growing dividend. The share dropped recently after its Southern European businesses were hit by the euro crisis (the sector isn't wholly insensitive to macroeconomics), but for me that created a buying opportunity.
Pick 2: GlaxoSmithKline
GlaxoSmithKline (LSE: GSK) is a well-run company in a classic defensive sector. While pharmaceutical companies generally are struggling with replenishing drug patent pipelines, GSK has used its scale to invest heavily in R&D, while also shrewdly diversifying into over-the-counter medicines and building a strong emerging markets business. Yielding 5.5%, it's also a generous dividend-payer.
Pick 3: Unilever
Consumer staples is another defensive sector. I'm still cautious about the downside risk of the Euro debacle, which puts a defensive bias on my stock-picking. But Unilever (LSE: ULVR) has a strong emerging markets presence which provides a platform for growth: it's better positioned than rival Reckitt Benckiser. On a price-to-earnings (P/E) ratio of 19, it's expensive, but the 3.25% yield makes for a sound long-term investment.
Pick 4: British American Tobacco
Tobacco is another classic defensive sector. Whilst the industry has been slightly on the back foot with the Australian government's measures to enforce the sale of cigarettes in plain packaging, it would be premature to forecast the industry's decline. Again, there is growth in emerging markets, and the industry is investing to develop safer/smokeless products. The hunt for safe dividends has made tobacco stock expensive so British American Tobacco (LSE: BATS) is trading on a P/E of 16, but the yield of 4% is safe.
Pick 5: Royal Dutch Shell
Oil and gas is not a classic defensive sector, but a play on the oil price is no bad thing. Royal Dutch Shell (LSE: RDSB) is a financially strong company with good diversification by geography and product. It has a strong position in liquid natural gas, and is a major player in US shale gas. That business has suffered as prices have been affected by the glut of discoveries, but for me it's a good long-term position. Shell's P/E of 8 and yield of 5% are attractive.
Trackers
Of course, I could make a case for lots of other shares, but I think these are five sound picks and I hope my thought process is informative. Why am I picking individual stocks rather than a tracker? Trackers are fine if you know what you're getting, but they don't necessarily offer the diversification you might expect. For example, a FTSE 100 (UKX) tracker would have half its exposure in just three sectors: oil and gas, mining and banks. That's certainly not a concentration I want at the moment.
So stock-picking can be a safer strategy. If you're looking for ideas on stock-picking, you could do much worse than follow one of the UK's top experts: Neil Woodford, who runs Invesco Perpetual's Income and High Income funds. For nine years, from 2000 to 2008, he outperformed the FTSE All-Share index. And in 2011, his funds returned double the index.
Mr Woodford has substantial holdings in some of the stocks I've mentioned. To find out which, and to discover more of his investing style, you can download this free and newly updated report from the Motley Fool: "8 Shares Held By Britain's Super-Investor". Simply click here, without obligation.
> Tony owns shares in Vodafone, GlaxoSmithKline, Unilever, Reckitt Benckiser, BATS and Shell. The Motley Fool has recommended shares in Vodafone.
