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What are the alternatives to a pension? - Guardian

Who would possibly want to pay money to a bank if they weren't allowed to touch their cash for 30 years; had no certainty that it would be worth more than when it was put in; were not allowed to do what they wanted with it when they did get it; and were not 100% convinced the bank would look after the money in the best way possible? Switch the bank for a pension fund manager and you have a few key reasons why some people will never invest in a pension. The recent stockmarket falls and drops in annuity income have simply been the final straw.

But if not pensions, where do you invest for your retirement?

Property

It is hardly surprising that so many people have opted out of pensions over the years and instead opted for bricks and mortar to fund their retirement.

As the chart on this page shows, £100,000 invested in property 10 years ago, would have turned into just shy of £221,000 now - even taking into account recent house price falls. Had that £100,000 been put into an average instant access savings account, it would have grown to £129,000 (not inflation adjusted), while it would have shrunk to a shocking £91,646 had it been invested in an average UK-based equity fund. But while the figures tell one story, it is not so much the returns that often draw those who do not like pensions to invest elsewhere; it is the lack of flexibility.

"For many years I have been very anti-pensions," says Colin Jackson, an independent financial adviser and director at Baronworth. "Yes, you get tax relief on your contributions, which is a great incentive to invest, but when it is time to retire and the market is against you I think the technical term is: 'You're stuffed.' "

Jackson does have company pensions from over the years but says he is "bitterly disappointed" with their performance. He thinks property is a far better medium- to long-term investment, followed by Isas, with pensions at the bottom of the pile. He also says that people should look beyond residential to consider commercial property.

"Many years ago we decided to buy the building we work in," he says. "That is now my pension."

Of course, those who got into buy-to-let four or five years ago probably now hate their property investment as much as pensions. But Chris Gilchrist, director at Churchill Investments, says it was the timing and not the principle of the investment that was wrong. "If people are thinking about doing it, now is not a bad time," he says. "But you have to think of it as at least a 10-year investment."

Lee Grandin, the managing director of Landlord Mortgages, says he has recently seen a renewed interest in bricks and mortar as a retirement vehicle. "This is particularly the case with people who have seen the return on their savings plummet. They realise they will get a better yield from buy-to-let, where you can still get as much as 10%," he says.