I hear what you say, I'm not a financial adviser.
However when you say 'apart from the tax benefits' that is a pretty big benefit to forego. You'd have to invest in an ISA which gives pretty good returns over and above a pension scheme to make up for that, being as how you'd have to invest post tax income in an ISA.
I completely agree with your comments about the inflexibility and tying up your cash. However I believe now you can withdraw 25% of your fund value tax free at 50 (for a reduced eventual pension admittedly) - this is a big change that's happened relatively recently if I'm reading all the info correctly.
The other massive benefit that you seem to have missed is that an employer will generally make contributions as well, thereby greatly increasing (usually at least doubling) the fund contributions.
Of course, that's no good for the self employed.
I agree with some of the other posters on here that property would seem to be a better investment, but there are fewer and fewer people able to choose this route because of the entry costs
You're right in pointing out my opinion of the tax benefits, yes you can get 22% added onto your premium, or you can claim this and more back from HMRC should your pension be older, but i feel charges, poor funds, and the enormous restrictions imposed upon you for this 22% are too much.
Employers can make contributions and depending on how they are paid, normally gross salary, then the employer can benefit also. I suppose these are good benefits becuase it's always good to get an employer to give you more for nothing. Wankers!
The self employed can technically pay into a plan as their own employer, so that benefit still exists, and for the self employed, not sole trader, but as a Private Limited Company, this could actually be a great means of side stepping the year end tax burden.
The major difference with a pension to an ISA, as in my example, is with an ISA you can use it as a share purchase vehicle. This way you can make some large investments, through the 'shell' of an ISA and enable returns of far greater than most pension funds.
I would esitimate vastly more than 60% of people remain in one fund, normally a standard manged fund, for the majority of the time, the returns on the majority of these funds, are below the returns that could be achieved on straight weight balanced FTSE 100 portfolio and property.
Of course, we're all more intelligent in hindsight, but seeing as most managed funds have around 80%+ within UK stocks, and are managed by experinced fund managers, returns, which invariably include charges, are far from ideal.
There are numerous funds available, although very, very few will be available to holders of pensions that give around 70% per year in interest. They are high risk, but some have given that for 5 straight years. The returns would be massive, although very high risk.
This money could then be invested in property to achieve the kind of exposure people lean towards.
You're correct in that you can take 25% from a pension at 50. But his Tonyness has decided to move this to 55 in 2010. Joy. No doubt this will move again.
Btw, incase you were wondering, i used to work at Zurich as a customer service agent, so i know pensions inside-out, upside-down and back to front.
Outside of that i have and always will be an investor on some level, but don't take that to be a comment making myself out to be the "big man" or someone important, i ain't despite how i may try to sound.
