Guest post by Adam Barney
One key way of ensuring you can retire comfortably – and possibly early – is by investing your pension money wisely. Most of us save for the majority of our working lives to set up a nest egg for our leisurely years, so we want to know our pensions are looked after in worthwhile investments which will enable us to make the most out of our money.
In the past, this would have been looked after for us, usually through buying an annuity. However there are many more options available to those out there with a pension, which may prove to be better for you as an individual than annuity. Here are just some of the things you can do with your pension:
Currently the most common form of pension payout, annuities may not return the most money but they do provide security in the form of a return guaranteed not to run out before someone passes away. The annual return is only about 5-6% and certainly pales in comparison to other investments. However inflation could prove good for annuity policies which are index-linked, which is the main draw for most people.
Retail bonds are basically loans that individuals can make as investments in companies. A lot of major companies take part in this, such as RBS and Tesco, which can provide some sort of reassurance to investors. As can be shown by the banking crash and subsequent nationalisation of RBS, this might not always provide a positive payout. There is essentially more risk than with an annuity, but there is also a certain level of control. These bonds have a fixed maturity date, so you know when they’ll pay out and roughly how much. You can get a similar payout from this type of investment than as with an annuity, with the certainty that you’ll get all your capital back at one time, which could more of an advantage. If all goes well you can again expect a return of 5-6% but this is not guaranteed, as some investors learned over the last decade.
Low Risk Bonds and Shares
The appeal of this type of investment is in the name; it’s low risk. This usually breaks down into 60% of your invested cash going to popular bonds, with the remaining 40% ending up invested in equity funds. Having a higher percentage of bonds, especially low risk bonds, is a positive way to combat inflation as it stops your pension fund dramatically losing value. The return is only 4% annually, however low risk bonds and shares are considered more secure than retail bonds.
Invest in Gold
Although a lot of pension savings are usually tied up in stocks or investments until they are withdrawn, a much less risky option would be to invest your cash in gold. Unlike the stock market or currencies, the value of gold has not seen as many crashes, and in most instances its value has increased far higher (and therefore promising a higher return) than other investment options. If you don’t know how to spot good gold IRA company, then there are plenty of IRA gold comparison websites you can track down on Google, helping to trace the perfect investment for you.
There are of course many other investment options for your pension fund, with many high risk options available to you should you feel daring enough to make the investment. However the above is a selection of some of the most common ways you can invest your pension and hopefully make a gain from it.