Despite the grandiose boasts from providers about vast sums available in their funds at retirement, the income you will actually buy with the money is minuscule. For example, a lump sum of pounds 100,000 sounds a lot. In fact, it might just ensure a man aged 65 a very basic annual income of about pounds 11,000. Someone aiming to retire 10 years earlier at a more pleasant 55, would find their income plunges further, to barely pounds 8,000. Women would get less because they are expected to live longer.
Indexation is important, too. Assuming inflation averaging 7 per cent over 15 years, probably not far off the real figures, the value of a pounds 10,000 annual pension which is not linked to inflation would tumble to pounds 3,620.
As for the state pension, the Central Statistical Office assumes that by the year 2026 the value of a state pension will be 10 per cent of average earnings.
Nor should you assume that simply because you belong to a company pension scheme, you are immune. The chances are that you are not in a "final-salary" scheme, where your pension is linked to a multiple of your last earnings against years of service. The present jobs market means that even if you are in one now, you won't be in it from cradle to grave.
One side-effect of the reforms brought about by the Pensions Act is that more and more companies are shifting to money-purchase schemes where a fund is invested and a final annuity paid in much the same way as with a personal pension.
Moreover, the likelihood is that your employer is not chipping in enough. Research by the Association of Consulting Actuaries indicates that the average amount of employers' payments, at barely 5.5 per cent, topped up to 8.2 per cent by their staff, was only enough to pay a pension worth about a third of final salary - after 40 years.
The question therefore is not simply one of whether you have a personal pension, or belong to a company scheme, but what are you doing to prepare seriously for retirement?
Take a 40-year-old man who wants a pension worth pounds 10,000 when he reaches 60. Assuming investment returns of 9 per cent before charges, the man would have to pay pounds 390 a month, rising by 6 per cent a year, until retirement. Women aged 40 would have to find pounds 434 a month.
Tax relief, however, reduces the amount you have to pay in. On monthly contributions of pounds 400, the Inland Revenue will chip in pounds 92 from April for those on basic tax rates. Those on the 40 per cent rate can claim a further pounds 68, cutting their total contribution to pounds 240.
Even if you can't manage vast savings, it pays to start early. Figures from Equitable Life, one of the UK's leading life insurers, show the benefits of doing so.
If pounds 1,000 were invested 20 years ago and the fund grew by 9 per cent a year, at maturity it would be worth pounds 5,604. The same money invested 10 years later would grow to pounds 2,367. The full pounds 20,000 invested in equal stages over 20 years would be worth pounds 55,756.
And what of those in company schemes? For you, the answer is equally simple. You must be prepared to start stuffing more money in as soon as you can. How to go about doing so will be discussed next weekn
Nic Cicutti, personal finance editor at `The Independent', has written a free 52-page `Guide to Pensions Planning', sponsored by Equitable Life. For a copy, call 0800 137372 or complete the coupon below.