MLegg

Published at 01:00, Friday, 01 June 2007

Do you think pensions are a poor investment and are best avoided? “Pension Bashing” has become a sport in some of the tabloid press, who sadly don’t usually distinguish between the costly failure of company-run schemes and the much-more-controllable option of personal pension arrangements.

Pictures of desperate staff approaching retirement and suddenly facing the future with a fraction or none of their promised retirement income is a headline grabber for the press – but it doesn’t tell the whole story.

This is not the real story of pensions, though without doubt a tragic situation for anyone facing it.

Millions have benefited from the government’s generous tax-breaks and strong investment returns for their own personal pension plans, but this news doesn’t sell papers.

This distorted view of pensions may persuade many not to take what could be a vital step in securing their lifestyle in retirement.

Pensions are a great solution, with greater investment flexibility than ever before and the sort of tax breaks you just don’t get with any other kind of retirement plan or savings.

Of course, not all pensions are flexible. Many have strict rules about how to get your money out so I would never advise you to have all of your savings in a pension plan – sometimes getting your hands on your cash is more important than saving tax.

So what do you do if you want to a secure and comfortable retirement but you just don’t like the idea of using a pension fund?

You need to decide when you’ll retire and how you want to spend retirement.

How much is it going to cost to maintain your standard of living once you have retired?

Will you take more holidays or less?

Will you change your car as often?

It’s all about having enough money stored up to pay for your lifestyle, whether that’s spending more time in the garden or sailing a yacht in the Caribbean. Simple really.

If you plan to retire at 60 then you should aim to have about £150,000 for every £10,000 of income you want each year in retirement.

Once you have worked out how much you need to accumulate, you will need a plan to achieve it.

You may decide that you want a property portfolio that pays rents to sustain your income. Being a landlord might be too much trouble during your retirement and you prefer to have investments to provide an income.

How to get there depends on many factors: how long you have until retirement, how much you can afford to save and what you want to achieve during retirement.

You could make a start with tax-free Individual Savings Accounts (ISAs) and put the maximum of £7,000 away annually – a flexible way to work towards retirement goals.

Devise a personalised game plan by sitting down with an independent financial adviser. A useful website for ideas is www.pensioncalculator.org.uk

To speak to a financial adviser competent in tax contact moneymatters@armstrongwatson.co.uk or call freephone 0800 195 2161 to arrange an appointment.

Published by http://www.cumberlandnews.co.uk