Thrifty Living: Do Yourself A Favour And Sort Out A Pension
Saturday 03 December 2005
Oh God. Saving for pensions. The only people in my household who actively save wear Dora the Explorer Pull-Ups. Who really saves any more? The minute hard cash hits my account, it ricochets off into a) the overdraft, b) childcare payments and c) credit card repayments.
And why give money to ne'er do wells? When the Turner Report came out this week, this apposite comment was made on the BBC's website from one Kyle R; "Perhaps if pensions were safe from greedy politicians it would encourage more of us to save." Remember Captain Bob? I would rather hand prospective retirement cash to a smoothie from the estate agent Foxton's than a smoothie from the City, which is why property is still such a popular option, and investing in pension schemes is not. Remember Equitable Life?
However, as I am hoping to lead us all, via this column, to a land of thrifty living, I cannot advocate burying one's head in one's multitudinous debts. Since I came clean about my £40,000 overdraft, I have pledged to live a better life. To use a Radio Two analogy, I have reversioned "Lady in Red", and have started wandering about humming "Black is Black", which is a far cooler song, as well as being an actively positive guide to the steps I am taking towards that rare domain, namely a current account in credit.
But if a better life is to be taken, a proper pension scheme must be embarked upon. And if you do it with continuity, that growing nest-egg will make you feel virtuous. It's a pricey, but healthy option, like snacking on a tub of Food Doctor Seeds. What's the best way?
Like many of us, I have long thought of the equity on my house as equivalent to a pension. I was encouraged to focus on capital by the unlikely figure of the editor of the BBC's Ten O'Clock News. When I was arts correspondent, he pulled me into an office, ostensibly to talk about a piece on Cameron Mackintosh. To my amazement he suddenly started bewailing his personal finances.
"You'll never earn enough to live on by working here," he said to me, sadly. "The only money I have ever made is from my house."
So I started watching house values. Eventually I noticed they had gone up rather a lot. So we remortgaged, and bought a little flat to let, and another, and another. Even when galloping growth slowed, property still looked like the best way of accruing something for a distant future when you might be in Dora the Explorer Pull-Ups.
But what if there is a property crash? As a freelance, I have no pension. I have an old BBC pension which might provide enough for my subscription to the New Yorker. Lots of us are similarly reliant on property, cut with a dash of optimism. Some of us vaguely hope our children will look after us. Why do you think I, a mother of four, have had so many?
Yet the Turner Report might bring us to our senses. As people who know a lot about finances say, you must spread your load and get into investments (rather than offspring). Bonds, Gold, Equities. I suspect a lot of us will never get round to doing half of this. But if Turner's National Pensions Savings Scheme arrives and enrols you to contribute 5 per cent of your earnings, post-tax, into a pension pot, something might start. If you work for a company, you will have another, no matter how small.
Four per cent is all it takes. The Government will give 1 per cent, through tax relief or credit. I am a huge advocate of automatic payments, since losing money when unconscious is far less painful than coughing up when awake. It's apparently known as "soft compulsion". Set it up, forget it, and come your 68th birthday it will be like a welcome present from a far-distant relative.
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