Why can't I invest my pension fund into a normal bank account?

I have 拢30,000 invested in a with profits pension fund. I have had no annual bonuses for several years and the penalty involved in transferring the fund to another scheme is prohibitive. Why does the government not allow me to invest my pension fund into a normal bank account? One with a guaranteed interest rate, say over the next ten to fifteen years.

Jane

I've never came across one with guaranteed interest rates. I've spoken to a few IFAs but I felt I knew more about the market than they did. One even suggested investing with Standard Life, while their troubles were still going on.

Jane's suggestion of a Self-Invested Personal Pension is a good one: as far as I know, you can invest the money in any reasonable asset - recent rule changes mean you can buy property, even art or fine wines, so I'm sure that interest-bearing investments would be okay.

As for getting a guaranteed rate long-term ... the only way I know of is to buy fixed-rate bonds: If you bought GILTs maturing around your retiement date you could achieve this, though the rates wouldn't be spectacular.

My broker (Hargreaves Lansdown) is always writing to me about SIPPs. I've been reasonably happy with the service I got from them (though that's not a recommendation to buy, and other legal washing-of-hands statements).

Sadly, it doesn't help you with what's already invested - though you could try appealing to the financial ombudsman if you think the company is imposing unreasonable exit penalties.

Update: you can hold bonds, GILTs and cash in HL's SIPP and they're currently paying 4.5% on everything over 拢7,000.

Why dont you look at the possibility of tranferring your pension to another provider who has guaranteed rates or good fixed interest rates. Depending on your circumstances why dont you look at a Self Invested Personal Pension - this gives you the flexibiltity of investing other than pensions funds. Go tak to a good IFA. Let me know if you want a phone number for a decent one

Here in the US when my pension is-.. its guarenteed, protected no matter how much is in my fund
Banks are only protected up to $100,000

Because you know full well that if they allowed you to do that you'd have the money out in a trice and then you'd have to go to the government for some money when you retire because you'll have spent all your pension money, and even this lot aren't that stupid !!!

Unless you are 55-60 there is no way you would want to transfer to a bank. Have to have equity.

You say you are invested in a with profits pension fund but what type of policy is it? Is it a final salary or money purchase arrangement? Is it a personal pension plan or a company pension plan? The market in general has been weak over the past few years and many insurance companies have imposed what is known as "Market Value Adjustment Factors" on transferring out of With profits and paying hardly any bonuses at all. However, it appears as though interest rates are on their way up and this should help the profitablility of the underlying funds. With profit policies are invested in a number of different areas anyway ie cash, property, equities and are designed to smooth out the fluctuations of the riskier stock market type investments. Pension funds normally have a number of different funds that can be invested in - and it depends on your risk profile which you are comfortable in investing in (Managed and With Profits Funds designed for the more caustious investor whilst Japan and special situations designed for the more adventuroues investor). You could direct future premiums into a different fund. If you have a company pension then ask the Trustees or Scheme administrator for more details. If you have a personal pension plan then ask either your IFA or the insurance company involved.