I was born in the 60s or 70s. Have my pension hopes been crushed?
The Institute for Fiscal Studies warned this week that children of the 60s and 70s will only be better off than previous generations when they retire if they have inherited wealth.
But I thought that successive generations are supposed to do better than their parents?
Part of the problem is disappearing gold-plated pensions linked to final salary schemes. Most people born in the 60s and 70s will retire with a pension pot based on how much they've put in, linked to how well the stock market has done. Parents' pensions were linked to their final salary with many getting two-thirds of their last pay packet.
So I don't have a final-salary scheme and I won't be getting any inheritance. So what can I do?
You should save more. In simple terms a pension is just a savings scheme, building up a nest egg for you to use when you retire. The bigger the nest egg the higher the retirement income you can generate. If you want £20,000 a year, for instance, you'll probably need to have saved around £300,000 in your pension pot.
But I'm 40 or 50 now. Surely I don't have time to save that much?
If you're 50 you'll need to stash close to £1,000 a month in your pension to have much hope of getting close to a £20,000 a year income in retirement. And then it will only happen if your pot grows by 5 per cent a year and you don't retire until you reach 68. If you're 40 you have more time and only need to be putting around £500 a month into your pension, based on the same criteria, to hopefully end up with £20,000 a year.
So I need to get a shift on?
The earlier you start, the higher your pension income. Bear in mind it's reckoned that every seven years' delay starting a pension, halves the eventual pension pot you get.