Pensions: Are You Prepared?

Saving for retirement is an important consideration for most of us, although how much effort are we really putting in to ensure we have the funds to support our desired future lifestyles? You might think you haven't the time to plan for a future that seems so very far away, or perhaps you equate retirement with infirmity and old age - something you'd rather not think about at all for as long as humanly possible? But with life expectancies increasing, and retirement ages currently at 65 with only a probable rise to 68 in the near future, you can expect to live as long in retirement as you will in your working life. And with health services and medical treatments also improving, you can even look forward to that time being a healthy and active period, full of opportunities to fulfill those dreams you've harboured while sitting at your desk on another Monday morning.

But will you have saved enough during your career to enjoy that long period of fun and relaxation? Pensions can seem complex and uncertain saving schemes that can easily be put on a backburner for more pressing financial commitments such as your mortgage or just monthly bills. For young people particularly, there are all sorts of reasons for delaying.

According to a 2007 research report published by the Department for Work and Pensions - 'Live now, save later? Young people, saving and pensions' - many people in their twenties asssume that pension saving is for those over 30, and that there is 'plenty of time' to think about their retirement funds once they're a bit older. The research also revealed the practical barriers facing young people, wth many 18-25 year olds saying they could not afford to pay enough into a pension to make it worthwhile. Others had concerns over the 'locked in' nature of pensions - that they would not be able to access their money until they have retired and that they might even die before they could enjoy the benefits of all that hard saving.

These concerns are all reasonable. But if you consider the potential opportunities for saving earlier and reaping the rewards later, you might change your mind about your pension. The pension table below will give you an idea of how much pension income you might earn if you start saving at various ages from 21 to 50. The resulting figures may seem depressingly low, but remember that inflation has been taken into account, so the income relects how much buying power you would have in today's money. Saving £100 or more from the age of 21 may seem impossible, but with many employers offering some level of contribution to your pension, you may find that you can put more money aside than you thought. Even if you can't afford terribly much until you're older and earning more, any contribution you make from as early a stage as possible will make a difference and it will set you off in the right frame of mind to save wisely throughout your career.

Perhaps you are also daunted by the choice of pension schemes available? It can certainly be difficult to know where to start when choosing the right pension and you should always get professional advice before you sign up to such a long-term investment. Whether you are young or you realise that you've delayed too long and now is the time to save, you should talk to a professional broker who can help you search the market and find the right pension for your personal needs. BeatThatQuote.com can put you in touch with such a broker, who will help find the best plan for you.

Nor should you despair if you are older but have not yet started saving. It is never too late to think about your future and you may have the earning power now to make much more impact on your pension potential. Just don't leave it too much longer before you start seriously saving for that long and happy retirement.

* Table assumptions:
The figures above are based on a Pension Calculator designed by The Association of British Insurers (ABI) and the Financial Services Authority (FSA). The calculator estimates the income a 'defined contribution' pension would provide if savings were started at a particular age. Defined contribution pensions include all personal and stakeholder pensions and group personal pensions, which are employer-organised pensions you may pay through your work payroll.

Further calculator assumptions:

• The figures are based on a £25,000 gross annual salary, which is just above the current UK average of £23,244. The government uses your gross salary to adds an income tax rebate at the basic rate (currently 22%) to your pension. This rebate is include in the calculated figures above.
• The above figures are based on an assumed retirement age of 65. If you retire earlier or later, this will affect the amount of money you can expect to receive year on year.
• Over time, inflation will reduce the buying power of money. The figures above take into account inflation at 2.5% so that the pension income stated reflects how much money you would get in today's money (ie, the real buying power in future of your estimated pension, expressed in today's prices).
• The calculator assumes your pension fund will grow by 7% a year until your retirement. It also assumes your pension provider will charge 1.5% of your fund for the first 10 years, and 1% thereafter.

The above figures are estimates only. The actual pension income you receive will be affected by numerous factors including interest rates, inflation and investment growth. Before deciding your pension saving plan, you should talk to a professional broker who can give you specific advice based on your circumstances. BeatThatQuote.com can provide this service free of charge.