It is true to say that in recent times pensions have not been the most popular topic of conversation at dinner parties. In fact, many individuals have chosen to turn their backs on the traditional method of saving for retirement, preferring instead to rely on the value of their property or even purchasing a second property on a buy-to-let basis – a strategy that has been extremely successful over the past two to three years.
It is not surprising that the pensions industry has suffered such scorn, with a seemingly never-ending list of scandals reported in the financial and mainstream press. The industry seems to have been on a voyage of self-destruction suffering problems such as the infamous Maxwell saga, mis-selling in the 1980s and 1990s and the Equitable Life debacle to name but a few. In more recent times, the closure of defined benefit (or final salary) pension schemes continues to undermine the security once felt by many employees who are now facing the prospect of a bleak retirement. The Government has not helped matters. Changes in the treatment of tax on dividends in 1997 amounted to a multi-billion pound tax raid on pension funds. Stakeholder pensions seem to be failing spectacularly in encouraging lower paid workers to provide for their own retirement, thereby easing pressure on the state system.
