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Pensions saving to become popular again

Pensions saving to become popular again

Category: Pensions

Updated: 25/02/2009
First Published: 25/02/2009

This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

The sharp fall in property values and reported rise in home repossessions is likely to change the once growing perception of 'my house is my pension fund' and drive people back into the pension savings market once the economy starts to rebuild, says a report from actuarial firm, Watson Wyatt.

The report, reality bites, looked at defined contribution (sometimes called money purchase) pension schemes where the employer and possibly the employee make monthly contributions for a pension on retirement and found that these arrangements had "suffered unprecedented stress" due to the present economic conditions. This has been a huge wake-up-call for contributors who have seen their fund values fall and will ultimately force pension providers to "sharpen up their game". The report predicts, in the longer term this will lead to "stronger, better quality products".

Under such schemes the employer may guarantee the amount of contribution - hence the term defined contribution. However, employees might be encouraged to top up the pension with their own contributions. The fund is usually invested in equities and property which, as we all know, can go down as well as up. Therefore, the level of the eventual fund is not guaranteed and the final results will depend upon the investment performance. In short, the onus is on you, to regularly check that your fund will be adequate.

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