Pension? Invest in gold instead
For years, securing a generous final salary scheme and regularly paying large pension contributions was the aspiration of many – it was seen as a sure fire way to guarantee that on retirement, you’d see a return on decades of investment. But is public faith in pensions decreasing? Some might think that it would be worthwhile investing in gold instead!
In last December’s Autumn Statement Chancellor George Osborne announced that from 2014/2015, the Government will reduce the lifetime allowance for pension contributions from £1.5m to £1.25m, and will also reduce the annual allowance from £50,000 to £40,000. He claimed that 98 per cent of people currently approaching retirement age have a pension pot worth less than £1.25m, and that 99 per cent of pension savers make annual contributions of less than £40,000. But that’s still 160,000 people a year that the Government will class as ‘rich’ just because their earnings put them above the basic rate tax band.
In reality, many high earners, such as GPs and headteachers, could end up caught in the net if they receive a pay rise towards the end of their career. People who have been saving hard for years and are looking forward to an early retirement may now have to re-think their plans to avoid a hefty tax bill falling at their door. In addition, increasing inflation rates mean that the pension pots of thousands more people will be pushed over the line in years to come. Many savers in their 50’s – some of whom may even have taken out an additional private pension fund to boost their retirement income – will find themselves working up to five years longer just to avoid their pension contributions from the last 15-20 years being taken straight back off them in a tax bill.
For these workers it may be too late to rectify, but for a large amount of employees who still have 10, 15 or more than 20 years left to work, it is likely that they will divert their money into venture capital trusts (VCTs) – which give savers up to 30% tax relief – or other vehicles such as investing in gold.
With such mixed messages circulating about pension saving, and such uncertainty about political interference in the future, young high earners would be considerably better off buying gold sovereigns to secure their future capital. All post-1837 British gold sovereigns are not subject to capital gains tax (CGT) because they are a legal tender, which is a massive benefit to investors. With a constant and ever-rising liquidity in most countries worldwide, British sovereigns would ensure a generous – and definite - return in years to come.
What the economy needs more than anything is stability. It used to be the case that many people aspired to working hard and getting a decent job, with the expectation that paying generous amounts into a pension scheme would set them up for the future.
Instead we’re entering an era where high earning young people will look at private ways to safeguard their capital, or worse, at a time when more people than ever are being enrolled into a mandatory workplace pension scheme, most are likely to opt out and instead rely on the state to support them when they reach retirement age.
This was posted in Bdaily's Members' News section by Mike Fleming CTA. TEP. .