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Saturday, December 18, 2010

Pensions, property & hypocrisy

Anybody who is member of a private or public sector private sector pension scheme who is not about to retire in the next few years needs to prepare for a shock. I'm mindful of the latest reports on the local government pension deficit which according to reports from the BBC is £100bn or 7% of GDP. Unlike private companies and their pensions who have to account for their deficits on their balance sheet...the public sector gets away with a massive fudge! There's hypocrisy for you.

Whenever you had planned to retire. Forget it!

Do you really think that with our rapidly ageing population, increasing life expectancy, gargantuan public sector debt and the rise of the Asian economic powers that we are going to be able to retire at 65...67...70. Not a chance....get real.

Imagine a pyramid that is rapidly inverting. Thirty years ago. There were a few oldies and the vast majority of us working to support the small numbers of people lucky enough to survive past 70. In the next few years there will be less and less of people of working age or working because of the downturn. These peoples taxes will have to support an increasing number of people that have retired and will be drawing pensions for many more years than originally planned.

Somethings got to give!

I'm not a property investing zealot by any means. I have a range of investments from bonds to shares and obviously a residential property portfolio. I'm glad however that I put much of my effort early on into a property portfolio rather than relying on the vagaries of a pension. I know that I have a reliable rental and income stream and hopefully in the long run an appreciating asset base.

Most of all I am glad that I'm not reliant on the promises of politicians who don't have the courage to come clean and tell us the truth about pensions.

Anybody who is keen to retire before they are 80 might do well not to believe the platitudes and projections of the politicians and the pension companies. Just like the last government who glibly and naively promised prudence in the public finances. There is a convenient truth and reality. Bricks and mortar continue to be a more real form of investing for your future than most alternatives.

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