Can gold restore the ‘confidence crisis’ in pensions?

The BBC are reporting today that a recent study has found some worrying trends in attitudes when it comes to pensions and saving in the UK. They report:

• 71% a scared at making the wrong pension decision
• 47% say didn’t know what to do
• 22% over 30 not saving enough to retire on

On the back of these findings there is a new campaign by Nest (National Employment Savings Trust) to try and encourage people to save for the future. Which you have to laugh at because the government and the Bank of England is doing its very level best to destroy saving in the UK – interest rates are at practically zero for a reason, to dissuade people from saving and to encourage them to spend now (instead of in the future – like in retirement), in a fruitless effort to prop up the UK’s broken economy.

In fact this is another great illustration of how one bad government policy in one area leads to ‘new’ measures elsewhere in government to try and counter the unintended (or in this case very much ‘intended’) consequences of the original bad policy.

In this case we have the government and the BoE trying to get people to spend now, resulting in people not saving enough in the future. So in order to ‘make-up’ for people not saving enough they’re introducing a scheme to automatically enroll workers into some form of pension plan (just remember you can opt of this automatic enrollment).

However will those pension plans be able to deliver? Let’s take the example that the BBC uses. The rather amusingly write in their graphic at the top that getting 7% a year interest on a pension is viable:

It’s amusing because in a world where interest rates in the main economies are negative, when allowing for inflation, the only way to achieve 7% is for pension funds to take excessive risk – another unintended consequence on low/zero interest rates.

For instance a pension fund could invest in Spanish bonds which a yielding about 7% at the moment to achieve this ‘7% a year’ the BBC talks about, but is there any real chance that Spain will be able to pay that money in the future, is there excessive risk-taking with this type of investment?

This is why having gold as some percentage is so important as part of any pension plan. It helps mitigates this risk. And thanks to SIPPs and SSAS pensions plans (basically self-invested pension plans) you get to hold whatever percent in gold in your pension that you are happy with – surly that beats Spanish bonds?

After-all gold has on average achieved a 17% annual return each and every year for the past 10 years – and with the central banks of the world, especially the BoE ready to hit those printing presses once again there is no reason to suppose why that won’t continue.

Related posts:

1. The second crisis of socialism
2. Recent Trend sees Investors Turning to Physical Gold Instead of Pensions
3. UK consumer confidence falls to 44 – Bank of England to respond by printing?
4. Thoughts on the Greek crisis and the politicization of economics
5. Unstoppable: Why this crisis will keep unfolding

Link to this article: : http://www.goldmadesimplenews.com/gold/can-gold-restore-the-%e2%80%98confidence-crisis%e2%80%99-in-pensions-7146/

Posted by Thomas Paterson on Jun 19 2012. Filed under Analysis, Gold News, Markets. You can follow any responses to this entry through the RSS 2.0. You can skip to the end and leave a response. Pinging is currently not allowed.