It's never too early to take out a pension plan. Nic Cicutti sees what's on offer
To almost everyone aged under 30, the topic of retirement planning is guaranteed to make eyes glaze over. It has a lot to do with a sense not so much of immortality, but of letting the future sort itself out.

This is understandable, as is the fact that most young people that age are unlikely to have much money to set aside. They probably won't be earning a lot, while costs such as renting or buying a home and a car for the first time, plus leisure activities, mean there is not much there to save anyway.

All this is may be normal behaviour. But it also comes at a heavy future price. Experts believe the value of a state pension, never that generous even at its best, will be worth as little as 8 per cent in 35 years' time.

The value of the state pension, when combined with the state's earnings- related Serps scheme, is based on a sliding scale. This means the more you earn, the less the combined pension will be as a proportion of your final earnings.

For example, someone with pre-retirement pay of pounds 7,500 a year would receive a maximum of pounds 4,102 in total pension (assuming maximum Serps and basic pension) before the last Budget increase. That is equal to 55 per cent of salary. However, the same person retiring on a salary of pounds 25,000 would have received a maximum of pounds 7,438 worth 30 per cent of income. This amount would not rise, irrespective of salary levels reached, so that to a person earning pounds 40,000, the maximum state pension is worth just 19 per cent of final salary.

The cost to the state of meeting the cost of growing numbers of people in retirement means the Government is considering for the first time the idea of forcing us to contribute to a pension.

That is why for anyone aged 30 or under, spending just a few minutes of one's time to prepare for retirement can make sense. Those few minutes still leave plenty of time to do the many other, more interesting things in life But they also ensure it will be possible to afford doing the more interesting things for far longer.

For many of us, it is possible to boost retirement income by means of company pension schemes. Others will have to seek a private pension.

Although there is no compulsory membership of occupational pension schemes, joining may be automatic. For those with the right to belong to one, the only question (apart from joining) is how to enhance retirement salaries by ensuring that contributions are as high as is legal and affordable.

This may involve making "additional voluntary contributions" (AVCs) into the scheme, alongside the minimum amount. This has the effect of enhancing the value of the final pension.

But many people, especially the self-employed and those with irregular employment, may find company pension schemes are not an option. For them, private provision is the only way forward.

Setting up a personal pension used to involve trying to decipher a mass of gobbledygook from insurance companies. There was the risk of being mis-sold something that would be worthless if you wanted to increase or decrease contributions.

Today, things have changed slightly. There are companies in the market which offer flexible plans with "level" charges, meaning that you pay the same fees for your money to be looked after in year one as in year 10 or 20. This means that old-style up-front charges are beginning to bite the dust.

But it still pays to be careful and ask the right questions of prospective pension providers. If you can sound as if you know what you are talking about, they are even more likely to try to give you a straight answer.

The Independent is offering readers interested in planning for retirement a free Guide to Direct Pensions. The 26-page guide, sponsored by Eagle Star, provides a range of useful information on how to prepare for retirement, including names and addresses of organisations to contact for further help. For your copy, call 0800 776666. Or look out for the coupon on this page.

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