Private Investor: It's best to keep pension eggs in many baskets
Saturday 27 May 2006
Not all of us plan on getting divorced, or even married, but most of us assume that we'll make it to retirement. Reflecting on the two personal finance issues of last week - the House of lords ruling on divorce settlement and the White Paper on pensions - I'm personally more interested in the latter than the former. "What does it mean for me?" I'm sure you've been asking as well.
The truth is that it doesn't mean that much to me. It's now 30 years since we managed to achieve a cross-party consensus on pensions. The two politicians concerned were Norman Fowler and Barbara Castle, figures from, respectively, yesterday and the day before yesterday. In case you've never heard of them, Mrs Castle was a famous Labour politician and Secretary of State for Social Services (combining health and social security) and Mr Fowler was her Conservative shadow; and he went on to have responsibility for pensions in Mrs Thatcher's government.
Anyway, these two got together in the mid-1970s and agreed a scheme called the State Earnings Related Pensions Scheme, or Serps. Company pension schemes were in pretty good nick in those days, so whatever went on there was pretty uncontroversial. The new scheme was launched, and some 10 years later that very same Mr Fowler, with the Chancellor Nigel Lawson, began the long process of running down the Serps scheme and the cross-party consensus broke down, never to be re-formed.
The reason I'm exploring these pleasant historical byways is that they illustrate an important point, especially to those of us who entered the workplace just when Serps was beginning to wither, the earnings link for state pension was being abolished, and the newfangled "portable" or "private" pension schemes took off.
We all know what happened next. Deregulation, mis-selling scandals, mismanagement, mis-regulation and the complete humiliation of the British financial services industry, symbolised by the practical collapse of Equitable Life. With so much political capital to be made out of everything from the Maxwell/Mirror pensions theft to pensioner poverty, no wonder there's no political consensus.
Can you see what I'm driving at? There's still no political consensus and people are still no less wary than they ever were of the pensions providers. There's nothing to stop a new Tory government, say, starting all over again. I'll certainly be interested in paying into the new national Pension Savings Scheme, because I'm always interested in paying into different pension schemes. As the Equitable demonstrated graphically, it's best not to keep all your eggs in one basket, so the more diverse your pensions arrangements the better.
Mine consist of some old "frozen" occupational pension from past employers, various old personal pension schemes, whatever is going on with Serps, and my current money purchase scheme. None of which do I expect much return from. Despite all the tax breaks and undoubted advantages of going through 'the professionals", I still prefer to look after the bulk of my investments myself.
So, for example, when the markets tanked last week , I didn't sell my shares. If the markets tank further, then I will have no one to blame about not selling up beforehand. Likewise, I can congratulate myself for my stead nerve and patience in buying more equities now should they recover. I will not need to go on protest marches about malfeasance and incompetence because those, if they transpire, will be my own fault. I won't be asking anyone for compensation, either.
I haven't yet taken the opportunity to buy more equities, but I shall, because I still think that by the time I retire, shares will have gone up more than other assets. What I need to do is spot the bargains bobbing about. By the time I'm 68, maybe even Kazakhmys might be up on its recent highs.
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