Exam practice

1) I don’t believe in the capital markets. For a start they are unpredictable and for another thing, not everyone has the possibility to take such risks with their money. I have always been of the view that you pay taxes through your working life in order to enjoy certain benefits from the state and certain protection against difficult times. For example, in case of unemployment or sickness or for your retirement, for that matter. So when I retire, I will live on what the government is due to give me. If I can’t afford cruises in the Caribbean, then that’s too bad.

2) I’m very lucky to have worked in the civil service, which has its own pension scheme. My salary has never been as good as it might have been in the private sector, but you accept that when you work for a public service. What you do get is job security, longer holidays, good medical insurance and an excellent pension. My pension is calculated as a percentage of my final salary. That’s very rare in the private sector. Usually private companies take your average salary over a period of, say, twenty years. So all in all I expect to be very comfortable when I retire, even if I haven’t had that much disposable income during my working life.

3) People think that as a company director, I’m bound to have all sorts of privileged pension benefits and company schemes going on – some special executive plan. But it’s not the case. We have a company scheme for all our employees but I don’t actually participate in it. Instead, I’ve put most of my money in a long-term savings account, that gives a good rate of return if you keep it in for long enough. It seems bizarre I know, but I make far more than I need to spend and I guess I’m naturally cautious with my money.

4) There’s a saying – I don’t know who by – that you should ‘ inivest in land, because they don’t make it any more! ‘ I think that’s good advice. Around 2004 there started to be a lot of stories in the media about company pensions and private pensions not delivering the benefits they had promised, mainly because they were linked to stock market investments. At that point I decided to withdraw my money from my own private pension and put it into property. I figured that if I bought a small office building, then by the time I reached retirement age, I would have paid off the mortgage and could live off the rent … so that’s what I did.

5) I realized quite early on that my state pension wasn’t going to be sufficient, so I took out a private one when I was about 30. It works like a managed investment fund – a mixture of blue-chip stocks – so I don’t really have much say in how the money is invested. Unfortunately, like a lot of private pension schemes, it hasn’t really performed as predicted. I think the projected growth rate was between 8 and 12% and it’s grown at about 4.5%, which isn’t much above inflation. There are signs that the stock markets are doing a little better now, so I’m hopeful that in the long run I will have reasonable funds for my retirement. Would I advise anyone to do the same … with hindsight, probably not .