How it all started

In late 2008 my employer, a small consultancy based in London, decided to start offering its employees pensions. We got the business's bank manager down from the north of England to advise each individual on pensions in general, and specifically what the bank could offer.

I learned a good few things about pensions in the hour I spent with the bank manager:

1. Everyone is / was incentivised thousands of pounds to sell you a pension - which makes the selection by the adviser a bit "murky" to say the least
2. Common knowledge is to start early in life invested in shares (high risk, high growth potential), and migrate these across to bond-type investments (low risk with a relatively fixed rate of return) as you get closer to retirement
3. Outside the public sector and big businesses you are limited to cash-based pensions i.e. money goes it, it gets invested, then there's a lump sum at the end to buy an "annuity" (you give them all your cash, they give you a taxable income until you die - basically, its you betting against them). When they talk about "gold plated" public sector pensions, this refers to the fact that there is no risk as to how much you will get
4. Your cash is usually invested into funds i.e. you give it to someone, and then they invest it on your behalf - and in almost all cases it appears that open-ended investment companies (OEICs) are the only way to do this (something I later found out not to be the case). These OEICs are not charities, and you pay them both upfront to buy into their companies (say 5%) and then pay them an annual percentage of your total funds invested with them for the work they do (this varies massively). The OEICs tend to specialise in different areas - say the Far East, large UK companies, etc. - and the level of specialism generally dictates the level of fee. Obviously (OBVIOUSLY!) the performance of the OEIC far exceeds the fee and so you win and the fund manager wins
5. The Government wants you to invest in a pension (so they can cut the state pension down), so they allow you to do it tax free - so, if you put £1 in from your pay packet, they put 25p more in (basic rate tax payer) or 67p more in (higher rate tax payer). Its not all generosity though - they tax the money in 50 years time when it comes back out
6. Pensions MIGHT grow at an average rate of 5%, 7% or 9% before fees. Based on the past. Which is never a guide to the future.

Needless to say, I took the pension offer I was given by the bank manager (who was "tied" i.e. could only sell pensions from one company) to an IFA i knew personally for a second opinion. I got quite frank advice - to summarise, the bank offered me an AEGON Scottish Equitable pension, and it pays the adviser who sells it £3,500 cash for doing so. It was reputedly the highest commmissioned pension on the market at the time. It wasnt a bad pension provided you wanted to make absolutely no changes to the amount you invested per month or the OEICs you chose to invest in. So it was pretty inflexible, and not really suited to a footloose 28 year old in a job with a company that was very heavily influenced by economic conditions!

Great sales job by the IFA I knew - he talked me straight into a Scottish Widows Personal Pension, which paid him about £1,200 for selling it to me (the advisers have to earn a living for this work, so i don't begrudge them the commissions), was flexible about the amount I invested each month, and which OEICs i put money into. Phil, the IFA, even pointed me towards some funds to start me off - 30% US, 30% UK, 25% Europe, 15% Far East and Emerging Markets.

He even got me to opt out of the State Second Pension - so instead of the Government investing my second pension for me, I could do it through Scottish Widows myself. Great stuff - fits well with my anarchist tendencies.

I remember asking "what about a SIPP (Self-Invested Personal Pension)?" - that was something we'd talk about later, once I had a decent amount of cash in my pension which would make it worthwhile.....