With increasing longevity and a low state pension, it makes sense to make additional financial arrangements for retirement.
It has certainly moved on from Samuel Johnson’s definition that “in England it is generally understood to mean pay given to a state hireling for treason to his country”.
Sadly, many pension fund providers have proved to be not up to the task with appalling returns.
Fortunately, there is an alternative: the Self-Invested Personal Pension (SIPP), whose rules were set out in 1989 and major changes effected in 2006.
A SIPP allows the individual to make their own investment decisions with a company providing the tax wrapper. There are generous tax carrots. Even a non-earner, like a baby, can contribute £2,880 annually and have their SIPP pot made up to £3,600.
For the highest rate taxpayers, 50 per cent tax relief is granted with no capital gains tax or further income tax to pay.
If past contributions are up to date, £50,000 is the maximum that can be invested in this tax year.
SIPPs are understandably popular. Standard Life report a 38 per cent rise in the first half of last year.
Unfortunately, the range of permitted investments includes an unregulated raft which has attracted the eye of the bogus provider. The gullible will fall for their sales patter.
Many such areas are both high risk and volatile in pricing, which could mean the investment is worthless and, at least, prove problematic just when the SIPP needs to provide retirement income.
From forestry plantations – where the salesman stresses the ‘green’ benefits of environmental investing – to carbon schemes, the range is wide.
Other advisers offer uncut jewels, notably diamonds, and are keen to quote auction prices and continuing world demand.
The moribund Financial Services Authority warns that unregulated areas should only be sold to high net worth individuals or those with acute financial knowledge.
No such distinctions are being made.
The FSA, which still has a stick for seven weeks, should regulate all SIPP items as a priority so that it goes out with some credibility.