I make a point of trying not to read online comments, particularly those posted below articles on the Daily Mail website.
That said, they can occasionally be quite entertaining, like this example from a reader after an article about two Britons held on drug trafficking charges in Peru:
But I digress. What I wanted to write about today was an all too common example of cynicism when it comes to saving for retirement using a pension.
What prompted this blog was this comment, also left after a Daily Mail article.
The reader from Shrewsbury clearly isn’t a fan of pensions are a retirement savings vehicle. They also fit more or less every Daily Mail reader stereotype I have.
He or she believes the government will steal your pension savings, presumably through taxation, changes to legislation or means testing.
Is that doesn’t happen, divorce will result in a pension sharing order seeing your ex-wife getting the benefit.
Or hyper-inflation will make it worthless. Or perhaps evil bankers will destroy the value of your pension.
These are perhaps all reasonable fears.
Legislation changes or taxation can reduce the value of any investment. Pensions are not a special case in this regard.
The Autumn Statement next week could see changes to the tax-free cash treatment of pension schemes, perhaps reducing the maximum amount available as a percentage of the fund, or introducing a cap as a cash amount.
Then again, it might not.
If you are married, you might lose some or all of the value of your pension fund should you get divorced. Then again, you might not. More marriages succeed than end in divorce, according to statistics from the Office of National Statistics.
Price inflation can reduce the value of your income in retirement, but again pensions are not a special case when it comes to inflation. Any income or investment can be eroded in value by price inflation. You can however invest in such a way to protect a pension portfolio from price inflation.
The prospects of evil bankers destroying the value of your pension fund seems a little far-fetched.
Retail financial services in the UK are strictly regulated with a great deal of regulatory and government attention on pension charges of late.
Whenever I see this sort of cynicism about pensions, I wonder what the person thinks is the alternative.
Surely the same fear that Gordon Brown will ‘nick it all’ (I would suggest George Osborne or maybe even Ed Balls pose a bigger threat) applies to other investment options or indeed relying on the State to provide for your old age.
One of the other comments in this Daily Mail article suggests readers should forget about pensions and instead invest in cash, gold, ISAs, managed funds and buy-to-lets.
Of course cash, gold, managed funds and property (typically commercial property rather than residential) are all investment options within most pension plans. The pension is simply the tax-wrapper, much like an ISA, rather than the investment itself.
Maybe we should all take advice from anonymous Daily Mail readers instead of working with properly qualified, experienced and regulated professionals.
Or instead we could choose to leave the pensions cynicism at the door and recognise the role that pensions can play within a well structured and regularly reviewed retirement savings strategy.
The best retirement plans we see typically involve pensions, ISAs and other tax-wrappers or investments, all designed to provide a target level of income in later life.
There is nothing inherently wrong with pensions, provided you understand what they are and how they work.
