Get in early for a happy old age

Pensions: Honey, we shrunk the welfare state - so make sure you find pr oper provision for your retirement

Most of us hope that by the time we reach retirement we won't have to rely solely on the state. While the state pension may act as a safety net, it hardly guarantees a comfortable retirement. Most of us accept that if we want to do more than scrape by in old age we need to make some financial provisions.

Joining your company pension scheme or taking out a private pension may just be the start. For many of us it may be necessary to make additional voluntary contributions into a scheme running alongside our pension, we may want other investments which can provide us with an income in retirement, or we may want to take out insurance which will pay for any care we may need in later life. One thing is for sure, the more money we have in retirement, the more options we will have open to us.

Pension funding is a major issue for everyone. A recent survey carried out by NatWest Life, the pensions arm of NatWest Bank, revealed that two- thirds of working people expect the basic state pension to disappear in the next century because of pressures on the public purse. While it is unlikely the state would offer no form of help to the elderly, the days of looking to the state to provide for all our needs in retirement appears to have gone.

More than 70 per cent of the workers who took part in the survey said they now believe it is the responsibility of individuals to provide for their own retirement. Only one-third believe it is the state's responsibility. The obvious way to fund retirement is through a pension, yet few of us make adequate provisions, says Lawrence Churchill, managing director of NatWest Life.

"Although most people are still contributing too little towards their pension, the survey indicates that people are now well aware that the onus will be on them to provide for their own retirement. It is up to us all in the pensions industry to work with the state to devise a better way for people to do this."

Currently, around one-third of retired people live on less than pounds 5,000 a year. One suggestion which has been put forward to ensure people make adequate pension provision, is that they should be obliged by law to put a fixed percentage of their wages into a pension plan. NatWest's survey revealed that we are split down the middle over whether we think this is a good idea or not.

Far more popular was the idea that the government should give us tax incentives to save for our retirement. This could mean an extension of the tax treatment of pension contributions, or it could mean more generous measures to encourage us to save.

A more holistic approach to financial provision in old age seems to be the answer. As well as wanting a good income from our pensions, most of us want the financial security of being able to pay for extra help in the home should we need it. This means we may well want to put aside money to ensure we have savings or investment available for when we reach old age. Insurance to help pay for the cost of care in a nursing home may also be high on our list of priorities.

The whole issue of pension funding and financial provision for old age is a headache for the government. As Mr Churchill says: "With barely three years of the 20th century remaining, we seem to be no closer to finding an answer."

This has prompted NatWest Life to launch a new initiative: A Changing Nation - Retirement Provision for the 21st Century. Four working groups have been set up to look at:

What the private sector can do and how the state can encourage people to make private pension provisions;

How to ensure every member of society, including those who will never be able to work or who take career breaks, have adequate pension provision;

How to provide adequate consumer education on making provision for old age;

How any transition period to a new funded pension system should be handled.

The working parties, which include civil servants, MPs, business leaders, pensions experts and consumer groups, will report in March. Whether they will come up with any concrete proposals remains to be seen. In the meantime, if you have not looked at your pension arrangements lately, now is the time to do so.

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