5 ways to get a better pension

Prabhat Sakya — Tue, 10 May 2016 17:00:53 +0000

A decent pension is really an inalienable human right. You work hard all your life, you save up your pennies, and when you retire you’re paid enough to make ends meet.

Except the way we’ve traditionally funded pensions is starting to fail, because the world around us has changed. That’s why looking to what we did before just won’t work anymore.

We need to completely rework this. So here are my five ways to get a better pension.

Start early

Time is your friend. Small increments, compounded over time, are like a snowball rolling down a hill. This is the most fundamental principle of investing.

Make sure you start saving, and investing for your pension, as early as you possibly can. And keep saving for your pension as long as you can, and without interruption. The law of compounding will mean that your pensions pot will increase more and more with each passing year.

So start saving in your 20s, and save until your 60s. In fact, keep on investing even through your retirement years as you look towards your children’s inheritance. Investing should be a lifelong habit.

Invest in shares and funds

Where will you get the best return for your pension? With such low interest rates, savings accounts yield next-to-nothing.

That’s why investments should be the cornerstone of your pension. I would combine some of the best investment funds around, with a series of carefully chosen shares. I would focus much of my attention on high-growth emerging markets, as this is where the most profitable companies will be in future years.

Invest in property

Alongside shares is property. In a previous article I discussed the relative merits of buy-to-let and stocks, but I believe every family with a steady income should own a property.

Property prices have been rising, and they will keep doing so, as Britain’s population goes up, and more people with jobs means greater demand for houses and flats. If you can possibly afford it, you have to be in this particular investing game.

Think strategically

A common mistake that new investors make is thinking that investing is a linear game. In fact investing, like most things in life, runs in cycles. Over the past 17 years we’ve had a long and difficult bear market in shares, but we’ve had a boom in commodities, with gold, and oil and mining companies doing well.

Over the next 17 years I expect this trend to reverse, with commodities crashing, and stocks booming. You need to be able to rotate into the right funds and shares as this transition takes place.

For this reason, if you’ve been out of equities until now, I think this is the ideal time to buy-in. In investing, the big picture is everything.

Be persistent. Be resilient.

Whether you’re buying shares, investing in gold or saving for a buy-to-let property, you’ll have difficulties and you’ll make mistakes. Probably lots of them. But you need to keep going. And if you’re persistent and learn from your mistakes, you will succeed.

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3 Hot Picks For March? Aviva plc, London Stock Exchange Group Plc And Gulf Marine Services PLC

Alan Oscroft — Tue, 01 Mar 2016 10:00:58 +0000

On 4 March, the London Stock Exchange (LSE: LSE) itself is due to report, though the results might be a little overshadowed by the news on 23 February that the firm is in merger talks with its German counterpart, Deutsche Börse. Since the announcement, the shares have spiked up 17% to 2,694p — and we’ve now seen a gain of 27% since the stock’s recent low on 9 February.

The LSE’s earnings have been growing steadily since the recession, and there’s another 12% growth expected for the year just ended — followed by 9% forecast for this year and 15% for 2017. The shares are on a relatively high P/E of nearly 24 for the year just ended, and that would only drop to 19 by 2017, which is some way ahead of the FTSE 100 average of a little under 14. And dividend yields of only around 1% to 1.5% are way below the market average.

But the City’s analysts are very bullish about the company, presumably because growing economic strength and a return to company growth should provide a nice long-term boost for the LSE.

The best insurer?

Then on 10 March we should have 2015 results from Aviva (LSE: AV).

The full year is expected to bring an 18% drop in EPS, but it should be accompanied by a 4.7% dividend yield. The shares have lost 19% over the past 12 months to 436p, putting them on a P/E of 11. Forecasts for this year suggest a 17% rise in EPS and a dividend boost to 5.5%, with a further 10% growth in EPS and a 6.3% yield pencilled-in for 2017 — and those would give us P/E multiples of 9.5 and 8.5, respectively.

Aviva’s Q3 update, after the acquisition of Friends Life, told us of a 25% rise in new life insurance business with more than £2.2bn in net inflow in the nine months, with the firm’s general insurance and asset management divisions also doing well.

With chief executive Mark Wilson speaking of “maintaining the momentum of Aviva’s transformation with a further quarter of improved performance“, would I buy the shares? Yes, I would (and did).

An oil outsider

Thirdly, I have an intriguing prospect in Gulf Marine Services (LSE: GMS), which is set to report on 22 March. The shares are down 54% since their April 2014 peak, to 74p, so what’s the story?

Gulf Marine supplies things called jackup barges, which I believe are essential bits of kit in the offshore oil extraction business, and the oil price slump leading to the shelving of so many prospects has seriously damaged sentiment towards the firm. Perhaps unsurprisingly, there’s a 30% drop in EPS expected for the year just ended. But I think investors could be missing an opportunity here.

Gulf Marine might not be supplying much new kit, but it’s still making decent profits from maintenance work — and there’s a return to earnings growth forecast for 2016. And here’s the killer — the shares are on a P/E of only 4.5 based on 2015 expectations, dropping to a mere 3.7 on 2016 forecasts!

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