Biting the bullet

Break through the boredom barrier, and make provision for a worry- free retirement. Accepting just any old pension package can be a big mistake, so it is worth taking the trouble to get good advice. Nic Cicutti points the way
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The Independent Online
Retirement planning is dull. Deciding how to provide for an event decades away can seem so boring that it is hardly surprising many people plump for the first pension product shoved under their noses by a salesman. Yet choosing the wrong one can literally halve your pension fund at retirement.

Here are some questions to ask a prospective provider.

What are the contribution fees? Look for companies that levy little or nothing for each premium, whether monthly or one-off. Good companies will charge pounds 2 per payment or less.

What are the annual charges? Look for companies that charge 1 per cent or less per year to manage your money.

How are charges levied? Some companies will tell you that their average annual charges are 1 per cent or slightly higher. What they don't tell you is that they sting you heavily up-front, lessening the load only after five or 10 years. Others take a larger cut of initial payments, calling them "capital" or "initial units". Look for a company with flat- rate charges from year one. Most important, make sure the adviser can explain to your satisfaction how charges are levied.

Is the independent adviser (always choose one of them) prepared to cut his or her commission, or accept a fee to sell the product? Aim to pay no more than pounds 300 or so to set up a simple, uncomplicated pension: three or four hours' work.

How flexible is the pension? You may work for several different employers, some with occupational pension schemes you should join instead. You may get divorced or lose your job, or have children, or want to increase or cut contributions for a variety of other reasons. Choose a pension that allows you to do all of these things without incurring extra charges.

Should you pay single or regular contributions? With regular premiums, the adviser will usually receive up-front commission based on the expected period of contributions. This takes a large slice of your first two years' payments. A single premium gives the adviser about 4 per cent of everything you pay in - but no more. Choose that, or a "recurring single premium" pension, where every payment counts as a one-off.

Despite all these warnings, you may feel bamboozled by pension company jargon. If you believe this is a deliberate tactic, have nothing more to do with the company or adviser.

If you are still uncertain which companies to look at, among the lowest-charging are: Virgin, Eagle Star, Flemings, Scottish Widows, Merchant Investors, Equitable Life, Standard Life, PensionStore. Ask for cost comparisons based on the same premiums paid in. Check on past performance, then choose.

Boring? Perhaps. But you will sleep easier once it's done

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