Alternative saving options for a comfortable retirement

As the Government announces large sign-up charges for their new NEST pension plan, what alternative savings options are on the market to help prepare for a comfortable retirement?

The National Employment Savings Trust (NEST) first came into being in 2005, as a means to offer an occupational retirement scheme to more than 10m employees who were not already signed up to a pension plan. With the product due to be launched in 2012, the finer financial details are now coming into the public domain, including designs to incorporate an initial contribution fee of 2% for all new participants.

The fee has been instigated as a means to cover the financial costs of set-up, ensuring that the bill doesn’t fall into the tax-payers lap; however financial commentators have suggested that it will transform this into one of the most expensive pension options on the market today, especially for late stage, short-term savers who join in the first few years.

With the base rate remaining low, spelling small returns for ordinary savers, what are the economically viable alternatives to saving for a comfortable retirement?

High Interest Savings Accounts

Opened and managed alongside your current account, a high interest savings account offers a safe option for consumers who can make regular monthly payments for a fixed period. Interest and withdrawals will be paid and limited, respectively, to a single annual arrangement, but if you’re happy to sit on the nest egg, rather than fuss with it, these accounts can offer pretty good returns – savers can currently secure in excess of 4.5% AER.

Cash ISA

The start of the new financial year has signalled a mad scramble for ISA products, with many banks and building societies staying open over Easter to accommodate customers. Despite recent watchdog revelations in the media about low paying ISA’s, there are still a few choice products on the market that offer up to 5% return – plus they’re tax free.

Savings Bonds

Offering the option for savers to lock away a lump sum for a fixed period and fixed rate, Savings Bonds represent a relatively safe option for people who already have something to invest. The risk here is that whilst the cash is locked away interest rates begin to climb, yet your returns are fixed. The best options currently on the market are a little off the beaten track, so shop around for more unusual providers who may be able to offer a better rate of return such as offshore savings.

This post was provided by Paul Roberts, a
financial writer and expert on savings.

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