Pension funds that are contribution based can't be underfunded, pretty much by definition.
> a pension now that may or may not be fully available after retirement, versus £40k minus tax invested into an index fund and accessible/reroutable whenever?
If we're talking about people putting that 40k into a pension because the tax on going over 100k salary is too much, you've saved 21k straight off by not taking it as salary. So we're talking about 19k in your hand vs 40k in a pension.
The pension fund you contribute to now could just be an index fund (it may be a managed fund though, depends what you pick), and as we have moved away from final salary pensions, there's no danger of underfunding because it's basically just a tax-shielded investment.
So the answer is, assuming you live to retirement (or even to 55, the age where you can take a tax free lump sum from your pension in the UK), that 40k invested in a pension is likely to be a lot better for you than 19k in a similar fund that's not tax-shielded.
And it's more likely to be there when you need it later in life because you won't be able to dip into it during your working years.
> a pension now that may or may not be fully available after retirement, versus £40k minus tax invested into an index fund and accessible/reroutable whenever?
If we're talking about people putting that 40k into a pension because the tax on going over 100k salary is too much, you've saved 21k straight off by not taking it as salary. So we're talking about 19k in your hand vs 40k in a pension.
The pension fund you contribute to now could just be an index fund (it may be a managed fund though, depends what you pick), and as we have moved away from final salary pensions, there's no danger of underfunding because it's basically just a tax-shielded investment.
So the answer is, assuming you live to retirement (or even to 55, the age where you can take a tax free lump sum from your pension in the UK), that 40k invested in a pension is likely to be a lot better for you than 19k in a similar fund that's not tax-shielded.
And it's more likely to be there when you need it later in life because you won't be able to dip into it during your working years.