Become a pensions expert in five days

by Ed Bowsher on 29 June 2009  |  2 comments
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Here's the first part of my guide on how to become a pensions expert in five days.

Pensions are really important for all of us. Governments are struggling financially, so it's more important than ever that people think about supporting themselves in their twilight years.

Trouble is, many of us are put off by all the jargon and the fear factor.

But actually, pensions aren't as complicated or as scary as you might think.

So this week I'm writing a series called: "Become a pensions expert in five days." It's aimed at anyone and everyone who hasn't retired yet. Hopefully, once you've read my series, you'll feel more confident about taking control of your pension. And you'll also realise that building a decent pension pot is an achievable goal for most of us.

Don't put your head in the sand. Don't be terrified.....  Instead read this guide and you could be on your way to a decent retirement.

What's your current pension situation?

The first step is to figure out what your pension situation is right now.

Let's start with the state pension.

Not everyone is entitled to the state pension. If you reach retirement age at any point from 2010 onwards, you must have paid National Insurance for at least 30 years before you'll be entitled to the full state pension.

But don't worry if you think you won't have worked the full 30 years when you retire. You can pay extra cash to the tax man now and get a full pension in return.

That said, the state pension isn't exactly generous - £95.25 a week for a single person. What's more, I expect it will get less generous in years to come. True, some pensioners are also able to claim some means-tested retirement benefits, but again, these aren't generous and they may well shrink in the future.

Next up, does your employer operate a pension scheme?

If you're lucky, your employer runs a final salary scheme. The deal is simple: you get to retirement age and your employer pays you a percentage of your final salary until you die.

Many public sector employees are entitled to final salary pensions, and traditionally many UK companies have also offered final salary pensions.

Sadly, many of those companies no longer offer final salary pensions to new employees, and one or two companies are even breaking their promises to existing workers.

I wouldn't be surprised if the government eventually broke its promises too.

So if you have a final salary scheme, should you worry?

Well, a bit, but there's no need to lose any sleep. For starters, even if your employer does amend the terms of your final salary scheme, you'll still get some form of private pension when you retire. You won't just be relying on the basic state pension. 

Then if you want to be prudent, you could always save some extra cash, perhaps in an ISA.

Overall, I think people with final salary pensions are still in a strong position. Enjoy your good fortune if you have one!

In my next post, I'll go on to look at some of the other types of pension schemes that are out there. Following on from that, I'll look at some practical steps that you can take to improve your pension provision.

Read part two of this series.