Greg Gosling is doing well. He is a director in a successful firm, earns about pounds 40,000 a year and expects his salary to rise for the foreseeable future. His wife Marisa has just returned to her work as a translator after the birth of the couple's daughter, Megan. They have two other children, Francesca, aged eight, and Victoria, who is six.

Greg's priority at present is to plan for retirement. He has up to 5 per cent of his salary to invest annually, and his firm is willing to place a further 10 per cent into any fund of his choice. But he is concerned about the heavy charges and commissions levied by many pension providers and financial advisers on the products they sell.

Greg is also put off by personal pensions because of the low annuities (annual retirement income) that is currently being paid out. At current levels, the pounds 60,000-odd saved up in various previous schemes would pay about pounds 5,000 a year at age 60, his ideal retirement age. Marisa has a further pounds 11,000 in pension savings. The couple have about pounds 5,000 invested in Premium Bonds but no other investments.

The adviser: Philippa Gee, managing director at Gee & Co, which is a fee-based independent financial planners, at Forester's Hall 1a Wyle Cop, Shrewsbuty, Shropshire, SY1 1UT. Tel: 01743 236 982. e-mail:

The advice: Although you are right to question the level of the expenses which appear to be automatically deducted from a pension, you should not dismiss pensions simply because of this. Similarly, you should not let low annuity levels put you off them altogether.

Personal pensions offer tax relief on the sums invested at your highest level of income tax and at retirement you can take a tax free lump sum of up to 25 per cent of the fund, with the residual as income.

The traditional annuity is not necessarily as poor value as it is perceived to be. It provides you with a guaranteed source of regular income and in this age of both low inflation and falling interest rates, it would be unreasonable to expect annuity rates to remain high. But there are more modern annuity options available, such as the phasing of benefits over a number of years to stagger the purchase of annuities, thus reducing the risk of timing. One can opt for a draw-down scheme to release the cash sum immediately and provide an income without actually having to buy an annuity, although this simply delays the evil moment until 75, at the latest. A further option is to take an annuity at retirement, but link it to an investment or with profit fund, moving away from the guaranteed income to one which has the potential to increase depending upon its performance. Bear in mind that this involves risk.

If you start a pension, you need to concentrate on building up as large a fund as possible. Two factors will impact on this: performance and charges. Given that the latter are a particular pet hate of yours, let's deal with them first.

Assuming 15 per cent of salary is paid in as an annual contribution (5 per cent employee plus 10 per cent employer) this makes a current premium of pounds 6,000, rising each year.

Typical charges levied by insurance companies would average a massive pounds 122,000 over the lifetime of a policy. Where does all this money go and what can you do to reduce it?

The most effective way to reduce charges is to strip out the commission element paid to your adviser: it accounts for up to half of all costs in a products's lifetime. You should ask him or her to accept a cut of, say, 50 per cent in commission levels. Or you could agree at outset for the adviser to work on a fee basis instead.

A particular scheme we would initially recommend is one offered by CGU - a recent amalgam of Commercial Union and General Accident - which has an incredibly low-charging structure, providing contributions continue until retirement. With no commission payable, the effect of other deductions over the lifetime of the CGU policy is quoted as being only pounds 8,140, thus slashing costs by more than 93 per cent. But the effect of charges will be incidental if performance is appalling. You should monitor this regularly.

Even though we have pointed out how to cut the cost of your personal pension, you may still wish to avoid them. What else could you do?

Essentially, you could choose any investment including:

Fixed interest investments (such as National Savings) - while some of these do pay the eventual proceeds free of tax, they are typically only for a period of five years, and no longer.

Equities - These can be invested in through an ISA (Individual Savings Account) although you are limited to pounds 7,000 in this tax year and pounds 5,000 thereafter. The advantage of an ISA is currently no Capital Gains Tax liability and certain income tax advantages. The investment is open-ended and can be used for income or capital growth. You obtain no tax relief on the sum you invest.

Property - The investments would need to be built up over a number of years before you could consider such an asset, and you could be liable for tax on the income and Capital Gains Tax when sold. Rather than invest in another property you could instead reduce the borrowings on your existing home, thus freeing up equity within your own house. In turn, the saving on monthly mortgage costs could also be invested.

Despite your concerns, I would recommend that you start a pension as soon as possible . I would also recommend that you divert some of your pension premiums to invest in a similar way for Marisa. While she does not pay higher rate income tax as you do, she is still a taxpayer, has adequate earnings, and will have a personal tax allowance in retirement to make use of. Not all income should be in your name.

Other priorities include an urgent review of the funds you have already used for past pension policies as some of these may not be suitable. You should also look at contracting out of the State Earnings Related Pension Scheme (Serps) in its current structure.

Next month, we will be starting a series called Investment Masterclass, free advice for readers who have a lump sum to invest. The Masterclass, similar to our current financial makeovers, will be carried out by Whitechurch Securities, a firm of Bristol-based independent financial advisers and investment specialists. If you would like to be considered for one, write to: Nic Cicutti, Investment Masterclass, `The Independent', One Canada Square, Canary Wharf, London E14 5DL. You must be willing for your name and picture to be used in the paper