The Great Savings and Pensions Scam. An A-Z Guide. Today D-F

D � Down. This is the likely direction of the value of most stock-market investments like unit trusts and pensions over the next ten to twenty years. Your financial adviser or bank salesperson will tell you that shares always outperform cash. But this is not quite true. Stock markets tend to go up about 1.5% a year. But in the 1970s and 1980s they shot up by over 4% a year. The reason � a flood of money put into savings products by the baby-boomer generation. But as the babyboomers retire, they�ll change from being savers to spenders. This will lead to a massive withdrawal of money from stock markets as they move money from pension funds into annuities. Values will then fall because the next generation will be so deeply in debt that they won�t be able to save as much as their parents and so there won�t be enough money to buy all the shares the babyboomers� pension funds are selling.

E � Equity release. With many people finding that their pension savings haven�t grown as much as they expected, they�re being tempted to increase their retirement income by borrowing money against the value of their homes with an equity release scheme. But they need to be very careful. Equity release products usually have worryingly high rates of interest so that someone of sixty five taking say a modest �50,000 loan against a home worth �200,000 will usually find they owe the whole value of their home before they reach eighty five and more than the value of their home if they live any longer than that.

F � Financial advisers. There are an estimated 165,000 people in Britain supposedly giving financial advice. But most are just salespeople pushing a narrow range of products which earn their employers the greatest commissions. About 28,000 of these advisers are registered with the Financial Services Authority as independent financial advisers. But only around 1,500 of these are actually fully qualified to give financial advice. Any financial adviser needs to take in at least �150,000 a year to cover salary, office costs, marketing and so on. This need for money causes what�s called �commission bias� � they tend to advise their clients to put their money into the products which earn them the highest commissions. For example, many advisers will recommend expensive unit trusts (high commission) but few will ever mention cheap index tracker funds as these pay no commission.