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Making the most of your savings, pensions and investments

If ever a reminder was needed that no-one can rely on a politician's promise, it has been delivered by the fate of those UK pensioners who believed their life savings, in the form of compulsory pensions were protected.

So, it's time to take a big hand in your own pension planning and ensure that even if the company goes down the tubes, your future income doesn't go with it. One sure thing, if you don't look after yourself, no-one else will!

Using the markets for UK pension planning

SIPPs (Self Invested Personal Pensions) are an exciting way to ensure you have a handle on your future. The best SIPP system we have found is with our City of London partners, comdirect .

If you follow this link to our pensions page you will find a button to take you to the comdirect products menu, just click on "Apply Online" and you can then get a printable PDF application form.

You can open a trading account with them that will give you control over your own pension investments. They are fully licensed and are FSA regulated.

Pension Plans

Online stockmarket trading for profit

comdirect is a licensed stockbroker and a very highly regarded City brokerage. As such they are in a unique position to provide UK Online clients, like yourself, the facilities to make a business of day trading, or you can open an account and do it the traditional way.

Unlike many online stock trading operations, this one has real people to talk to. That's important, because an experienced broker can guide you through some technical details and ensure a success. You'll find the button to their site by following this link to our stockmarket page.

UK Stocks and Shares Trading Account

Spread betting — a "flutter" on the stock market with Tradindex

Just because a nest egg is a serious business, doesn't mean you can't have fun.

So, after the basics are taken care of, your basic pension arrangements are in place. Why not try your hand at spread betting on stocks and shares and markets in general. Take a look at our partners Tradindex and take your new expertise to have a flutter on a spread betting account.

Just follow this link to our spread betting page, you'll find it self explanatory, and a fun way to make a great little earn!

Trading online with UK Online Finance

Every day seems to bring fresh news reports on radio, television and in the papers, that Britons will not have enough money to live on when they retire. An online trading account set up through our weeb pages can help make the diffrence.

What exactly is the problem with UK pensions?

In a nutshell, there is not enough money in pension funds to guarantee a comfortable retirement for today's working population. And it looks as though the total shortfall may be even wider than previously thought.

In the past the government has been forced to admit that official estimates of the level of pension contributions had been inflated by a statistical error. The upshot is that many employees putting money aside for their old age may well find that their retirement income falls far short of what they had hoped.

Can an individual do better trading the index?

The are two underlying reasons for shortfalls, one is that medical advances over the last few decades have greatly prolonged our life span, forcing the pensions industry to support a greater number of pensioners for longer periods. Government figures show that average life expectancy in the UK rose by five years for men and four years for women between 1980 and 2000.

But the problem has been exacerbated in recent years by dwindling stock market returns. Pension funds depend on steady stock market returns to pay policyholders. And when share prices fall — as they have been doing for the last two years — it becomes harder for funds to meet their obligations.

Lower returns have forced most of the big company-run pension funds to suspend generous schemes which guarantee employees a fixed proportion of their final salaries on retirement. Nearly one-quarter of firms have now set up defined contribution or money purchase schemes, which do not guarantee the final pension sum and are therefore less risky for companies.

To be fair, the problem is by no means unique to the UK. The double whammy of an ageing population and tumbling share prices has hit pension funds in most other European countries as well. Recently, France has been hit by a wave of strikes as the government attempts pension reform.

So the answer is, yes. An individual trading their own pension, or becoming involved in a stakeholder plan can do better than the large pension companies. It is not that the market had underperformed, or done anything different to what it always does. But large companies, hedged about with red tape cannot take advantage of the positive aspects of trends in the index, while always being victim to the negative ones.

Why should a person take the stock market index seriously?

The amount of money a person needs to put aside in order to ensure a given level of retirement income is rising steadily. Experts say that a 30-year-old man aiming to retire at 65 on an annual income of £20,000 a year in today's terms would currently need to save about £260 a month. This rises to about £450 for men aged 40.

For women, deemed more likely to take career breaks, the minimum saving requirement is likely to be higher still.

What about the state pension? Isn't that better than spread betting or online trading?

No. With a careful program put together with our pension investment partners, a person with a moderate savings level can do far better than the state pension. There is still a basic state pension, but at a maximum of £75.50 per week for a single person or £120.70 for a couple, it is unlikely to fund a comfortable retirement. The low level of the state pension partly reflects a concerted move by successive governments, worried over Britain's rapidly ageing population, to encourage more people to save for their own retirement.

However, that plan received a setback in the early 1990s when it emerged that many consumers were wrongly sold new pensions which left them worse off at retirement than they would have been if they had stuck with their original scheme.

Some say the episode, still the subject of a review by the Financial Services Authority, has made consumers more reluctant to put their money into pensions.

Can I do anyting by trading with Tradindex?

You can have a lot of fun spread betting, and even more fun if your sensible and well planned stakeholder pension scheme is paying off well. Last December the government announced in its pension green paper plans to offer incentives to workers who choose to work on beyond the age of 65. Wouldn't it be better to be working for yourself?

In addition, from 2006 the retirement age for new public sector workers is to be increased from 60 to 65. However, the green paper was widely criticised for not acting to halt the widespread closure by firms of employee defined benefit — also called final salary — pension schemes. What is more, in a bid to get consumers to put away more money for their retirement the government would like to see a host of simple easy-to-understand savings products launched.

However, the stakeholder pension, introduced in April 2001, has so far met with a lukewarm response from consumers. Some analysts recommend the alternative approach of raising the minimum retirement age from 65 to 70 or beyond.

Trade union groups, in contrast, favour shifting the burden onto employers by forcing them to contribute towards employee pensions.

A fresh stock market boom would help, but with equities worldwide still heading firmly south, this looks increasingly unlikely. But as the savings gap continues to widen, the search for a solution is becoming ever more urgent.

Should I worry if my scheme is in deficit?

A deficit alone does not necessarily mean there are intrinsic problems with the company pension scheme. Most pension funds have been buffeted by big stock market falls in recent years and, unless your pension scheme got out of equities and switched to safer investments, it is likely to have a shortfall.

It is important to remember that pensions are long-term investments, and it is likely that when market conditions improve the fund will bounce back. However, you might be asked to make more contributions into the fund.

People are living longer and there will be increasing demands on the fund in the future. Problems have arisen in the past when a company scheme, already in deficit, has been wound up. This has left many workers with much reduced pensions, even though they have saved all their working lives.

The government recently introduced measures aimed at protecting workers' contributions, so this situation is less likely in the future. This shouldn't be a green light for complacency, though, with pension experts warning people to be vigilant, and take an interest in their investment's progress.

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