The Great Rip Off

Your workplace pension scheme and/or your private pension probably requires you to convert your pension-pot into an annuity (i.e. annual income paid monthly). Journalist Paul Collinson in the "Guardian" 24th. August 2013 has interesting things to say about this system for rewarding/defrauding you at the end of your working life.

You can opt out of workplace pension schemes, although not until after your employer has opted you in.  So if you're in one, get out of it - now.  The scheme might insist on keeping contributions you have already made until you retire, in which case you've just learned your first lesson about how pension schemes extract money from you.

Nor do you need a private pension. These schemes are headed up by overpaid men in red braces who probably skim 2% minimum off every one of your contributions. Pension Funds exist to make money for the Fund, not for you.  The annuity you get at retirement probably won't repay you as much as you've paid in unless you live to a very, very ripe old age.  If you die earlier than actuarial forecasts say you should, the balance of your pension pot goes to an insurance company, probably with a "thank you" payment to the pension fund that you fell for in the first place.  You should be more scared of pension funds than of internet fraud or identity theft - a lifetime spent piggybanking a proportion of your pay cheque will probably turn out to be about as rewarding as buying lottery tickets - if you're an average earner, that is. All the cards are stacked against you. If you're already massively overpaid your pension is probably gold-plated by the taxpayer or your company's shareholders. 

We don't teach folk anything useful about money and finance and how to avoid being ripped off either at school or after.  We leave them to find out for themselves at 65 what they should have found out for themselves at 25  - invest for yourself.  Do I hear cries of "Ooerr!  I can't do that!  I don't know anything about investing!"?  So already you're level with a lot of pension fund managers and Independent Financial Advisers.  

I give financial advice for nothing - and I bet that in the most cases it will be the same as an IFA gives you for about £125 and hour.

Third in shares.  Third in UK short/medium term Gilts(*). Third in Premium Bonds - which with only average luck pay more than the banks. Forget ISAs. They're another scheme for extracting commissions and management charges from you. Do everything for yourself. Don't leave it to the wide-boys.

(*) NEVER corporate bonds.  I know IFA's who were busy flogging Lehman bonds 24 hours before the firm went belly up.  

Watch this space.