FEAR OF FINANCE

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Small wonder that everyone is turning to the National Lottery; the alternatives are too awful to contemplate. It is now a case of six lines a week and a small miracle please. Failing that, one will be forced to thrash out a sensible investment strategy.

The very thought of pensions and long-term savings leaves many reaching for the Rennies. It is the twilight world of investment fund management, actuaries and mega financial decisions.

The widely accepted definition of an actuary is someone who makes an accountant look exciting. Unfortunately, this unassuming and methodical breed is responsible for a climate of fear unparalleled in Western civilisation. In short, they are the Khmer Rouge of family and personal finance.

Actuaries are people who calculate how long you are going to live and advise insurance companies on risk and the premiums they should charge. They might tell you that theirs is a precise science, but their incoherent jottings are terrifying to the general public, rendering the entire pensions business a no-go area.

A session on the psychiatrist's couch and you learn the reason for your deep-seated anxiety - you have as much hope of choosing the right pension or endowment policy as you do of winning the National Lottery.

Go for an occupational scheme (one run by your employer) and the chances are that a jovial 20-stone man will borrow some of your savings to refuel his yacht in the Canaries.

Even if you slave for an honest proprietor, the cards are stacked against you. To qualify for a maximum pension in a scheme which will pay you a proportion of your final salary, you will need to have worked for the same company for 40 years. Move jobs and the quality of life in your twilight years will be severely diminished.

So it's a personal pension, then. Hang on, wasn't there some stink about people piling out of occupational schemes into personal pension plans? The compensation bill is going to run into billions of pounds, which doesn't say much for the performance record of personal pensions. Come to that, didn't some endowments policies come in for a pasting, too?

They say the trick is to pick the right one - a bit like endowment. And there lies the root cause of all the anxiety. How do you compare the performance of a savings plan which is going to last you 25 years or more?

Whether or not you sail around the Caribbean in your retirement really depends on how well your fund manager - the person who invests your money on the stock markets - performs in the early years. If he or she makes a dog's dinner of it, your pension or endowment pot never really recovers from a severe bout of early malnutrition.

The arithmetic is frightening. A 30-year-old who wants to increase his or her retirement income by pounds 5,000 a year must invest an extra pounds 84 a month net of tax. A 40-year-old will need and extra pounds 156 a month net of tax.

So that is the key. Is your fund manager any good? Well, he or she may be. But if 25 years is not a long time in fund management, the chances of a useful manager remaining at his or her post are remote. At the first sign of talent, a City rival will offer a huge salary and off they will go. Just after you have signed on the dotted line.

No, its back to the lottery (see below). Perhaps 10 lines a week would do trick. At least that would be cheaper than paying vast amounts for an unquantifiable investment.

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