Sixty-five is the new 25. The newly retired, it seems, have social lives not dissimilar to those in their 20s, with half eating out regularly and two-thirds taking more than one holiday a year. According to research from NEST – the new low-cost workplace pension scheme – a third frequently top up their wardrobes and 3% are in a band.
Separate research from the Office for National Statistics (ONS) and Saga also found that we reach our peak of happiness and wellbeing between the ages of 65 and 69.
Freed from the shackles of 40 years or more in work, retirement is certainly a stage of life to be enjoyed. But with purse strings tightening, life expectancy increasing and annuity rates falling it's becoming increasingly difficult to save enough for our golden years.
Indeed, research from the Department for Work and Pensions found that 11 million Brits are facing inadequate retirement incomes, while the ONS reports the number of people contributing to personal pensions fell from 6.4 million in 2008/9 to six million in 2009/10.
The government is doing its bit to get us saving with the launch of NEST and auto-enrolment. From October, it will start rolling out its low-cost workplace-based pension scheme, which over the next five years will see some 10 million savers automatically enrolled into either NEST or their employer's own scheme.
For the majority of savers taking advantage of a workplace pension is the most sensible option – especially if your employer makes contributions too.
However, if you don't have access to a work pension or can afford additional savings alongside one, a personal pension is usually the best starting point. Pensions also enjoy the benefit of tax relief. So while you may have to pay tax on your pension income you can earn tax relief on your contributions, even if you don't pay tax.
All savers will automatically receive tax relief worth 20% on all contributions – which means that every £80 you pay in will be topped up to £100 by the government. Higher and additional-rate taxpayers can reclaim further tax back through HM Revenue & Customs.
But for the uninitiated choosing a pension is no mean feat, particularly if you are doing so without the assistance of an independent financial adviser. This is why each year Moneywise does the research for you and scours the market to reveal the best pensions and pension funds to help you save for an enjoyable retirement.
BEST PERFORMING FUNDS WITHIN A PENSION (MIXED INVESTMENT 20-60% SHARES)
Winner: Invesco Perpetual Distribution
Commended: Jupiter Merlin Income
Formerly known as ‘cautious managed', this sector houses funds for savers looking for lower-risk funds, with managers only able to invest a maximum of 60% of the fund in equities. At least 30% of the fund must also be invested in fixed-income investments such as corporate bonds and gilts (UK government bonds) or cash.
As a result, savers who invest in this sector shouldn't expect stellar returns, but equally they shouldn't expect too many nasty surprises, which can be very helpful in the years leading up to retirement.
This year's winner is Invesco Perpetual Distribution, which has returned a very respectable 42.19% over the past three years. The fund is designed to provide steady returns over the mid to long term. Fixed-interest investments such as corporate bonds take up approximately half of the portfolio, with the remaining half invested in UK and international equities – many of which are household names.
"This fund brings together Invesco Perpetual's star managers from the equity and fi xed-income worlds. Neil Woodford, Paul Read and Paul Causer are a pretty tantalising proposition," says McPhail.
However, the fund may be a little conservative for younger investors and is better suited to older investors de-risking their pension as they approach retirement. Jupiter's Merlin Income fund was the runner-up in this category. It is a fund of funds that invests across a range of funds run by other companies.
Pearson remarks that it has been hit by global stockmarket volatility in recent years, which explains why it has not performed as well as the Invesco Perpetual fund. Its long-term outlook, however, is good. "If the world economy begins to turn around, then this fund is likely to outperform the more cautious approach currently adopted by Invesco Perpetual," he adds.
BEST MIXED INVESTMENT (40-85% SHARES)
Winner: Fidelity Moneybuilder Balanced
Commended: Aberdeen Multi Asset
With a greater weighting towards equities, funds in this sector carry a higher risk – but with most pension savers having a lengthy period over which to invest, it's a sensible sector to look at.
Our winner, Fidelity Moneybuilder Balanced, invests around two-thirds of its portfolio in UK shares with the balance divided between fixed interest and cash to reduce the overall risk of the fund.
Nick McBreen says: "Ian Spreadbury has to be the doyen of fund managers who stick to what they know in the UK market, achieving returns that balance income delivery for investors while keeping a watching brief on the need for capital growth for the long term. The UK fixed interest arena has thrown up lots of challenges but the manager has weathered the storm well."
In the past three years the fund has delivered an impressive 45.46% return.
Aberdeen Multi Asset was the runner-up for this sector. It invests in other Aberdeen funds. "Equity accounts for around two-thirds of the portfolio. However, in contrast to Fidelity, stockmarket exposure has more of an international flavour, with the UK only accounting for half," explains Pearson.
BEST FLEXIBLE INVESTMENT
Winner: Jupiter Merlin Growth
Commended: Threadneedle Global Equity
Funds in this sector – previously known as ‘active managed' – come higher up the risk spectrum. Although funds may invest in a variety of different investments, managers have more freedom as to how that money is invested and can invest 100% in equities if they choose.
The award this year goes to last year's runner-up – Jupiter Merlin Growth Portfolio. Run by John Chatfeild-Roberts, Peter Lawery and Algy Smith-Maxwell, this fund of funds invests in the most successful growth-oriented funds currently available.
McBreen remarks: "The fact that another Jupiter Merlin fund takes the honours here simply endorses the value of fund of fund investing, run by a very experienced and savvy team. While many try to replicate the fund approach, few can match the consistency and value the Jupiter team offers investors."
The Threadneedle Global Equity fund takes the runner-up position. Although the fund achieved growth of 57.8% over seven years, the fact that it only achieved 9.87% over five illustrates how investors in this fund need to be prepared for plenty of ups and downs.
As McBreen says: "It will continue to be a rocky road with plenty of ups and downs but Threadneedle as a fund house has the depth and breadth of expertise to gather value from the global market."
Winner: Threadneedle Latin America
Commended: Invesco Perpetual Latin America
The specialist sector provides a home for funds that can't be accommodated by other more mainstream sectors. So making meaningful comparisons between the funds that occupy it isn't easy. Some funds invest in healthcare, others in natural resources.
However, funds that specialise in Latin America are performing the best in this sector, with both our winner and runner-up focusing on this region.
Achieving a seven-year return of 173.9%, this year's winner, Threadneedle Latin America, is capitalising on the huge changes that this region is enjoying as the constituent economies grow, and McBreen believes the team is well-placed to ride the wave.
"Brazil has been a significant contributor to the success of the sector, as has exposure to financials, materials, consumer staples and telecom stocks, and there should be plenty of gas left in the tank for this fund to continue to prosper and grow."
Invesco Perpetual Latin America is the runner-up and the "other strong player" in the region, says McBreen.
However, while both these funds have performed well in recent years, the judges warn that this region can be extremely volatile and is not for the faint-hearted investor. "These funds should form no more than 10% of a portfolio as the risk of capital loss in the short-term is extremely high," says Pearson.