Pension savings interest rates 'better with risk'

Wednesday 18 November 2009

Article by Mozo

Pension savings interest rates can be hampered by adopting too careful an investment strategy, it has been warned.

Warren Chant, cofounder of research organisation Chant West, tells the Sydney Morning Herald that a riskier approach can yield better savings interest rates on pension accounts.

He adds that some pensions lend themselves to a riskier approach due to being inflation-linked – providing additional funds over time to support a more ambitious investment style.

By focusing on secure investments, however, he warns that a lower retirement income may be created as a result.

With an ageing population and much of an individual’s income derived from interest earnings after retirement, this could put people’s quality of life at risk during their later years.

Chant West compiles two sets of data for investment returns, to take account of the fact that pensions are not subject to tax on their earnings, whereas super funds have tax deducted.

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