Why save when you can inherit?

Is any kind of pension planning better than none?

That poser might seem like a no-brainer – surely any savings strategy is superior to a void?

Yet an emerging thread of what might gently be described as ‘last throw of the dice’ thinking looks set to challenge this.

Here’s the mooted long-term savings plan as roughly outlined by an increasing number of clients (mainly in their early 40s) when talking to their financial advisers (and passed on with incredulity to me or others equally agog at the oft haphazard direction of the UK’s pension savers).

“I know it might sound macabre but my main pension is the inheritance from my parents,” is how their pitch begins.“When they die, I will inherit their home and sell it, putting all or part of the proceeds into a personal pension – bagging tax relief on the way in too.”

As a final piece of proof, their proposal tends to be qualified with something akin to “this way, I can spare myself decades of financial constraints imposed by regular monthly pension payments.”

I first heard a version of this sketched out by a reader in a letter (during a previous life as a newspaper personal finance editor) and dismissed it as desultory financial confection.

Four years on, with greater numbers of financial advisers reporting a swell in anecdotal evidence of such sentiment, it’s alarming how more savers have found themselves – or even begun to coalesce – into this dangerously precarious position.

Scrutiny of the problem’s symptoms may help.

These are, in no particular order, a lack of sense of responsibility, a wayward view of financial planning, and an atheistic approach to the UK’s financial services industry.

The latter is perhaps the easiest to understand: after the 1980s/early 1990s personal pension mis-selling scandals, the state second pension ‘contracting out’ fiasco, Equitable Life farrago and brouhaha at establishing a decent ‘lifeboat’ fund for collapsed final salary pensions, it’s no wonder scepticism has set in.

Revulsion at pension fees, too, is part of the problem.

Recent research from Alliance Trust Savings underscored how self-invested personal pension (Sipp) customers were losing tens of thousands of pounds over the long term, via commissions paid by the fund managers out of the pension funds to the Sipp provider itself.

Over 10 years a £50,000 pension pot in a conventional Sipp, growing at 7 per cent a year, would mushroom to £85,400, it calculated.

Yet if annual 0.75% commission had not been deducted, it would be worth an extra £4,900.

After 25 years, the impact is more eye-watering: the Sipp is now estimated to be worth £190,700 rather than £221,800 – a loss of £31,000 (approximately a sixth of its potential value) thanks to commission charges.

This socking great difference between the two has a monstrously material impact on the annual private pension earned from an annuity with a life company – and savers increasingly know it.

While any argument in favour of pension fund management fee sizes has yet to be convincingly won, plenty of long-term savers harbour genuine resentment at such a bite being taken out of their pension fund.

So what about the wayward view of financial planning behind the inherited parental home plan?

No doubt, its lack of foresight is disturbing, omitting to factor in possible care home fees (£27,000 a year on average), a possible parental desire to release equity with a lifetime mortgage as well as greater longevity.

After all, when your parents are likely to live long into their 90s, it could mean you wouldn’t inherit until you hit your 70s.

Yet it’s the overall vacuum in responsibility for one’s own retirement that is perhaps most terrifying.

For sure, eyeing up your parents’ cash is nothing new but pinning an entire pension plan on it is.

Where does the blame for all this lie?

No doubt the historic whiff of mis-selling scandal and paucity of trust in financial services has its role but the utter rejection of financial self-determination is symptomatic of a broader failure.

Its psychological seeds probably lie in the easy credit available in the years running up to summer 2007 when a culture of using somebody else’s money – i.e. that of banks, building societies and card lenders – to manage your finances gained serious ground.

But it needed fertile ground to grow and this has been provided all too readily by political failure.

A threadbare savings culture, piecemeal tax incentives for both lower and higher income savers and heinously complex pensions savings means-testing are also to blame as obstacles, making it impossible for many to see any clear merit in putting aside their own cash for old age.

Likewise, the absence of any credible political cheerleaders for pension provision is also at fault.

When did you last hear anyone outside the financial services industry tell you that planning for your own pension was to be applauded, that it was a brilliant undertaking, and that it was worthy of reward?

Nobody can suggest there is any kind of easy solution but things have come to a pretty pass when all it takes is a finger pointed at a parental home to plan for a pension.

Political leadership on pension saving is sorely missing: without it, the danger of those fingers being badly burned rises by the day.

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Sam Dunn is a freelance consumer journalist who writes on all aspects of personal finance for national news websites, newspapers and magazines. A former Personal Finance editor of The Independent on Sunday, he was named ABI Freelance Financial Journalist of the Year in 2008. In 2006, won the Headlinemoney Consumer Journalist of the Year award and in 2005, scooped the Harold Wincott Foundation Personal Finance Journalist of the Year honour.