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Is A Pension A Viable Alternative To Property

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Warning of poor pensions for many workers

By Nicholas Timmins, Public Policy Editor

Published: July 11 2007 01:57 | Last updated: July 11 2007 01:57

Millions of younger and middle-aged workers face inadequate pensions in old age, the Association of Consulting Actuaries has warned.

More employers were closing their occupational pensions in the face of rising costs, it said on Tuesday, while little money was going into the money purchase schemes that replaced them.

Another 13 per cent of defined benefit – usually final salary – schemes have shut to new members in the past two years, with 81 per cent now closed, according to the ACA’s biennial survey. The proportion closed to further contributions from existing members is also up, at 14 per cent compared with 10 per cent in 2005.

But while employers are pouring money into their defined benefit schemes to plug pension deficits and to allow for rising longevity, the amount employees and employers are jointly putting into the defined contribution schemes that replace them has reached a plateau at just 10 per cent of salary.

That was too little to provide a decent pension, said Ian Farr, the ACA’s chairman.

Employers’ contributions to defined benefit schemes have doubled in five years to an average 22.6 per cent of earnings, with employees’ contributions up 40 per cent to 6 per cent of salary, according to the survey of more than 300 schemes that cover more than 2m members.

The big rise in the cost of defined benefit schemes is leading to more closures, the ACA said, while the low-cost pensions that replace them will be inadequate. It is calling for legislation to make it easier for employers to share pension risks with their employees.

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Pensions much safer than property - diversified portfolio, including cash - property, single leveraged (in many cases) asset, you just need a basic crash and it's gone

people don't put enough money into pensions at present - many of my friends put in a pittance and really don't realise how little they will have to survive on

asset rich (a house), cash poor OR asset poor, cash rich - which will be more fun at retirement?

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Guest Charlie The Tramp

Well I must admit all through my working life I did not pay into any Pension Scheme, however, I have retired with adequate income from my assets, my house has not been tapped, but sadly the opportunity I was given has long gone for others now.

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I'm in my early 30s and highly pessimistic about the future of both state and occupational pensions (because I'm a peak oil catastrophist). So I think that property could contribute significantly to ones pension if bought for the yield, not for capital gains.

This would necessarily mean not buying at today's low-yielding prices.

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