Pensions – the worst investment?

I attended an excellent event last night.  It was the Barnes Roffe LLP Directors’ Question Time.  We were hosted by HSBC in their tower in Docklands and we had an excellent panel taking questions from the floor, with over 150 guests.

One question, and a subsequent long debate, focused around the perceived poor value of pensions and annuities, with their charges and returns criticised.

A strong defence of the current pensions and savings environment was put forward, but there was an overhanging feeling that due to past history the pensions industry had to accept some criticism.

Unfortunately, I did not see it all as the fault of the pensions industry.  Yes, the products and services are sometimes difficult to understand, but therein lies the rub.

Your pension might be the biggest investment you make next to your home, possibly it might be greater!  Who amongst us can truly say that they understand what is in their pension, how it is invested, what charges apply, what options they have and whether the investments suit their risk profile?  I think the historical dislike of pensions has come from the well-publicised problems of the industry in the recent past, but I suspect blame is often laid at the door of the pensions industry by people who, after many years, have realised they have not got the pension they thought they should have – in the vast majority of cases I suspect many of the disappointed savers took much interest in their pensions until near retirement.

We probably know what our house is worth, what our few shares in BT are worth, what we have in our ISA, what our life cover is, etc.  But how many of us have a detailed knowledge of our pension funds, risk profile, fund performance and charges?

So my top tip is as follows – get close to your pension advisor and take advice – often!  They should be your second closest advisor, after your accountant of course.

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