My son was anti-pension, until...

Phil Clarke, technical services manager at Rowanmoor Pensions, says his son was reluctant to even consider opening a pension, until he bumped into a financial adviser...

"I was recently talking to my son who, at the tender age of 25, is a director of his own business. He has never seen the point of pensions and had previously told me he would never have one.

"What was the point? It would not be possible to access it until the age of 55 and only then withdraw a maximum of 25%, and there would need to be a considerable amount remaining to provide a decent pension.

"He had decided that the best plan for the future would be to purchase residential properties and the rental income that they provided would be more than enough to provide him with an income in retirement.

"Yes, he appreciated that considerable borrowing would be needed to purchase the properties, tenants needed to be found, that rent would be taxable and there would be Capital Gains Tax implications. You may therefore be surprised to learn that after attending a recent presentation by a local financial adviser, pensions suddenly appeared a lot more attractive. Why is this so?

"It was pointed out to him that any personal contributions he paid would receive generous tax relief and any company contributions would be offset against profits. His company operates from a small industrial unit and currently pays rent of £800 per month.

If the company could make a reasonable contribution, perhaps after two years, to a self-administered pension scheme, the scheme could borrow to allow it to purchase the unit. The company would then have security of tenure as the property would need to be owned by the pension scheme.

"It would also be safe from creditors in the event of a company failure. The rental income (which would still have to be paid) would be paid to the scheme as landlord, which, after paying back any borrowing, would accrue for future pension provision.

"There would also be an option under a small self-administered scheme of making loans to the company when enough cash had built up to expand the business.

All of a sudden, pensions did not seem the pointless waste of time they had in the past and no doubt my son will be looking at them differently in future."