Few pensions give enough for a comfortable retirement. Abigail Montrose explains why four out of five workers are not saving enough
Being in a pension scheme does not automatically guarantee a good pension. In fact, just one in five workers is on track for a comfortable retirement, according to a recent survey by NatWest Life, the investment arm of NatWest Bank.

The survey suggests that on average we need pounds 179 a week to make life comfortable in retirement. This figure represents half national earnings, so those earning more will need a larger pension to retain their standard of living in retirement.

The basic state pension for a single person is pounds 62.45 a week, or pounds 99.80 for a married couple. Employees who have contributed to the state earnings- related pensions (Serps) will receive an additional state pension. But even if you have contributed throughout your working life and retire on average earnings, the maximum additional pension is pounds 53.40 a week. Saving for retirement becomes key.

If you are in your company's pension scheme, you can contribute up to 15 per cent of your annual salary into the scheme each year. This is on top of anything your employer is contributing. The final pension you receive will depend on the type of scheme your employer offers, but the maximum pension is two-thirds of final salary. Few people will achieve this.

If you are in a final salary scheme, your company will pay you a pension when you retire which will be based on your final salary and how long you have been in the scheme. To find out how much pension you can expect, speak to your personnel department. If it looks like this will be inadequate, ask about making additional voluntary contributions (AVCs) to boost your retirement provision. Your company may offer its own AVC scheme, which is usually the best option. You can go to an outside provider but the charges are normally much higher.

If your occupational pension scheme is a money purchase scheme, your pension contributions will be invested for you and your final pension pot will be based on the investment performance of the fund. You then use this money to buy an income in retirement. Every year you will receive a statement telling you how your pension fund is performing and what the estimated value of it will be when you reach retirement. You should ask your pension provider how much income your pension fund is likely to provide when you come to retire. Again, if it looks like being inadequate you should consider making AVCs.

"Those in personal pensions should speak either to their pension provider or their financial adviser to find out if they are on target for an adequate pension," says Ian Parker of Black Horse Financial Services, the pensions arm of Lloyds Bank. "We can project how much your pension pot will finally be worth when you retire and how much income this might buy you. But this does not take into account inflation, which will erode the buying power of your money."

To work out the likely effects of inflation, ask your adviser for help and adjust your contributions and pension target accordingly. According to NatWest Life, an annual rate of inflation of 5 per cent would reduce the buying power of pounds 179 to pounds 67 in 20 years.

If your personal pension looks like falling short of your target, increase your contributions or consider retiring at a later age. Often, you can arrange for personal pension contributions to be increased each year either by a set amount or the rate of inflation.

Unlike occupational schemes, maximum annual contributions to a personal pension are age-related. Under-35s can invest up to 17.5 per cent of their salary each year, rising to 20 per cent at ages 36 to 45, with the top tier being 40 per cent at age 61 and over.

You also need to keep tabs on any different sources for your pension provision. Jobs for life are a thing of the past, so most of us will accrue our pension provision from a variety of sources. It's a good idea to keep all records of any pension schemes you have been in and your financial adviser should be able to help you work out exactly what provisions you have and how much these are likely to be worth.


If you are not a member of a company scheme - join.

Find out from the pensions office how much your retirement income is likely to be.

If it is not enough - be prepared to increase contributions into your scheme.

Investigate whether you can make top-up contributions into a company AVC or set up a private (free-standing AVC) scheme instead.

If you are not in a company scheme - start a private one.