... Make sure I have a decent pension

The Value of the state pension is withering. By 2010, it is estimated that pensions will only be worth about 20 per cent of average earnings. That means sensible planning now is vital.

The first thing to remember about pensions is that the younger you are when you start, the better-off you will be on retirement. The second is that pension contributions qualify for tax relief, which means the amount you put away for your old age is in effect topped up by the Inland Revenue.

Have you got a pension? If you work for an employer which has an occupational scheme, you should be a member of it as this is the cheapest way of providing a pension. Make sure your contributions are up to date.

Occupational pension plans fall into two categories: final-salary and money-purchase schemes. At the moment, final salary is the most common. On retirement, employees receive a fraction of their final salary for each year they have worked for their employer. The maximum pension you can receive is two-thirds of your final salary. Most schemes work on a one sixtieth basis, which means you will have to be with your company for 40 years in order to receive the maximum pension of two-thirds of your final salary.

Increasingly, occupational plans are of the money-purchase kind. Typically, both you and your employer put money aside, which is invested to provide a pot of funds on your retirement. The value of your pension pot at retirement will be based on how well your investments have performed - not, as with a final-salary scheme, on how much you are earning when you reach retirement, or how long you have been in the scheme. When you retire, you will be able to take some of the money in your pot as a tax-free lump sum; the rest must be used to buy a retirement income known as an annuity.

Whether your employer operates a final-salary or a money- purchase scheme, you should find out how much pension income you can expect when you retire. Write to the trustees and ask for a forecast.

If you are a member of a money-purchase scheme, you should receive a statement each year setting out what your pension fund is worth, how the investments are performing and what size of annual pension you should be able to buy.

Such pension contributions alone may not provide enough for your retirement, so many schemes also allow you to make extra payments towards a bigger pension. These payments are known as additional voluntary contributions or AVCs. If your work scheme does not allow this, you can start a free- standing additional voluntary contributions (FSAVC) scheme with a separate insurer.

The alternative to an occupational pension is a personal pension plan which you can take from job to job.

A number of the firms which offer personal pensions have earned reputations as rogues by misleading thousands of people in to dumping their perfectly adequate company pension schemes in favour of inferior personal pensions - thus earning commissions worth thousands of pounds for the over-eager sales forces.

The insurance industry is still investigating this mis-selling, and where necessary paying compensation. But the operation is proceeding at a snail's pace, with only a fraction of the total number of cases dealt with so far. If you were in a company scheme but were persuaded to transfer to a personal pension, were you a victim of mis-selling? If you are in any doubt, make it a priority to check with your new pension provider or the independent financial adviser who arranged the pension.

That said, if you are self-employed or do not qualify for an employer's pension scheme, personal plans are designed particularly for you.

Personal pension annual contribution limit

Age Max % of salary

Under 35 17.5

36-45 20

46-50 25

51-55 30

56-60 35

61-74 40

News
Tommy Ramone performing at The Old Waldorf Nightclub in 1978 in San Francisco, California.
peopleDrummer was final surviving member of seminal punk band
Life and Style
Swimsuit, £245, by Agent Provocateur
fashion

Diving in at the deep end is no excuse for shirking the style stakes

Sport
The Mexico chief finally lets rip as his emotions get the better of him
world cup 2014
Sport
German supporters (left) and Argentina fans
Final gives England fans a choice between to old enemies
PROMOTED VIDEO
Voices
Spectators photograph the Tour de France riders as they make their way through the Yorkshire countryside
voicesHoward Jacobson: Line the streets for a cycling race? You might just as well watch a swarm of wasps
Life and Style
lifeHere's one answer to an inquisitive Reddit user's question
News
peopleDave Legeno, the actor who played werewolf Fenrir Greyback in the Harry Potter films, has died
Sport
Mario Balotelli, Divock Origi, Loic Remy, Wilfried Bony and Karim Benzema
transfersBony, Benzema and the other transfer targets
Sport
Yaya Touré has defended his posturing over his future at Manchester City
News
Detail of the dress made entirely of loom bands
news
News
ebookA unique anthology of reporting and analysis of a crucial period of history
Life and Style
beauty
Sport
There were mass celebrations across Argentina as the country's national team reached their first World Cup final for 24 years
transfersOne of the men to suffer cardiac arrest was 16 years old
Arts and Entertainment
Armando Iannucci, the creator of 'The Thick of It' says he has
tvArmando Iannucci to concentrate on US show Veep
News
A mugshot of Ian Watkins released by South Wales Police following his guilty pleas
peopleBandmates open up about abuse
Sport
Basketball superstar LeBron James gets into his stride for the Cleveland Cavaliers
sportNBA superstar announces decision to return to Cleveland Cavaliers
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Biztalk - outstanding opportunity

£75000 - £85000 per annum + ex bens: Deerfoot IT Resources Limited: Biztalk Te...

Trade Desk Specialist (FIX, Linux, Windows, Network Security)

£60000 per annum: Harrington Starr: Trade Desk Specialist (FIX, Linux, Windows...

Service Desk Analyst (Windows, Active Directory, ITIL, Reuter)

£35000 per annum: Harrington Starr: Service Desk Analyst (Windows, Active Dire...

Network Engineer (CCNA, CCNP, Linux, OSPF, BGP, Multicast, WAN)

£40000 per annum: Harrington Starr: Network Engineer (CCNA, CCNP, Linux, OSPF,...

Day In a Page

A History of the First World War in 100 Moments: Peace without magnanimity - the summit in a railway siding that ended the fighting

A History of the First World War in 100 Moments

Peace without magnanimity - the summit in a railway siding that ended the fighting
Scottish independence: How the Commonwealth Games could swing the vote

Scottish independence: How the Commonwealth Games could swing the vote

In the final part of our series, Chris Green arrives in Glasgow - a host city struggling to keep the politics out of its celebration of sport
Out in the cold: A writer spends a night on the streets and hears the stories of the homeless

A writer spends a night on the streets

Rough sleepers - the homeless, the destitute and the drunk - exist in every city. Will Nicoll meets those whose luck has run out
Striking new stations, high-speed links and (whisper it) better services - the UK's railways are entering a new golden age

UK's railways are entering a new golden age

New stations are opening across the country and our railways appear to be entering an era not seen in Britain since the early 1950s
Conchita Wurst becomes a 'bride' on the Paris catwalk - and proves there is life after Eurovision

Conchita becomes a 'bride' on Paris catwalk

Alexander Fury salutes the Eurovision Song Contest winner's latest triumph
Pétanque World Championship in Marseilles hit by

Pétanque 'world cup' hit by death threats

This year's most acrimonious sporting event took place in France, not Brazil. How did pétanque get so passionate?
Whelks are healthy, versatile and sustainable - so why did we stop eating them in the UK?

Why did we stop eating whelks?

Whelks were the Victorian equivalent of the donor kebab and our stocks are abundant. So why do we now export them all to the Far East?
10 best women's sunglasses

In the shade: 10 best women's sunglasses

From luxury bespoke eyewear to fun festival sunnies, we round up the shades to be seen in this summer
Germany vs Argentina World Cup 2014: Lionel Messi? Javier Mascherano is key for Argentina...

World Cup final: Messi? Mascherano is key for Argentina...

No 10 is always centre of attention but Barça team-mate is just as crucial to finalists’ hopes
Siobhan-Marie O’Connor: Swimmer knows she needs Glasgow joy on road to Rio

Siobhan-Marie O’Connor: Swimmer needs Glasgow joy on road to Rio

18-year-old says this month’s Commonwealth Games are a key staging post in her career before time slips away
The true Gaza back-story that the Israelis aren’t telling this week

The true Gaza back-story that the Israelis aren’t telling this week

A future Palestine state will have no borders and be an enclave within Israel, surrounded on all sides by Israeli-held territory, says Robert Fisk
A History of the First World War in 100 Moments: The German people demand an end to the fighting

A History of the First World War in 100 Moments

The German people demand an end to the fighting
New play by Oscar Wilde's grandson reveals what the Irish wit said at his trials

New play reveals what Oscar Wilde said at trials

For a century, what Wilde actually said at his trials was a mystery. But the recent discovery of shorthand notes changed that. Now his grandson Merlin Holland has turned them into a play
Can scientists save the world's sea life from

Can scientists save our sea life?

By the end of the century, the only living things left in our oceans could be plankton and jellyfish. Alex Renton meets the scientists who are trying to turn the tide
Richard III, Trafalgar Studios, review: Martin Freeman gives highly intelligent performance

Richard III review

Martin Freeman’s psychotic monarch is big on mockery but wanting in malice