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Time to Take Control of Your PensionTime to Take Control of Your Pension By TONY HAZELL PAYOUTS on with-profits pensions have fallen by 38pc in just three years according to new research. But returns from unit-linked policies, the other main insurance based savings scheme offering a more direct link to the stock market, are even worse. The analysis published by data analyst Money facts this week underlines what a pig's ear the insurance industry has made of investing our retirement savings. Separate research from Money Management magazine shows that the vast majority of balanced managed unit-linked funds [those investing in shares, bonds and property] have failed to break even on a lump- sum investment made five years ago. Money facts' findings show that someone saving Pounds 100 a month into a with-profits plan for 25 years would in July 2002 have finished with a pension pot of Pounds 226,874 on average. In July 2005 a similar saving would have produced Pounds 141,539, 37.6pc less. The 2002 pension would have over the odds on maturing withprofits policies. In other words, people are getting more than their fair share of the pie and payouts will have to be cut further. Those looking for solace in unitlinked investments will be disappointed. Money Management looked at how much a Pounds 10,000 gross contribution to balanced managed funds five years ago would be worth now. The average was Pounds 9,198. You might think this is acceptable given the stock market falls from 2000-2003. But this excuse, which is routinely trotted out by insurance companies, does not hold water. According to Standard Poor's a similar investment in Legal General's FTSE All Share tracker would now be worth more than Pounds 10,600, thanks to the considerable boost from reinvesting dividend income. So LG's tracker can beat these well-paid fund managers. In fact, the balanced fund managers' performance is worse than the figures suggest because they could have invested in property and bonds, provided a level income of Pounds 10,464.48 a year to a 65-year-old man plus a tax-free Pounds 56,719 lump sum with Prudential. The 2005 pot would provide Pounds 6,618.96 a year and a Pounds 35,385 lump sum. But investing in the average unitlinked fund would have resulted in still sadder returns of just Pounds 45,415 after 20 years, compared to Pounds 61,578 for a with-profits investment over a similar period. The core reasons for these rotten returns are poor investment management, high charges and in the case of with-profits funds the fact that they were paying out more than they could afford in the past. There is worse to come. Standard Life admits it is still paying both of which delivered excellent returns. What is the answer for savers? Take control of your pension. Treat it as a precious investment, not a product to be bought from an insurance company and then shoved in a drawer until retirement. Self-invested personal pensions, or Sipps, are the ideal solution because they allow you to choose your own investment funds so you can have top managers running your money. From next April 6 Sipps will become even more flexible, allowing esoteric investments such as fine wines and works of art as well as the much-oversold residential property. You can find details of how to set up and run a low-cost Sipps at the website of financial adviser Hargreaves Lansdown or through Sippdeal. Alternatively, fund manager Jupiter runs its own Sipp or independent financial advisers with the G60 pensions qualification may help. For a list of Sipp providers, try www.sipp-provider- group.org.uk. Homepage Other open community sites http://www.business-business.biz Please support are sponsors. To design you custom retirement plan. http://www.retirement-plan.us For planning a IRA rollovers. http://www.ira-rollover.us Professional asset allocation and the wonders it can do. http://www.asset-allocation.us Professional money management: National ranked performance. http://www.roth-ira.us Managers selected to fit your needs. http://www.money-managers.us |
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