Great expectations?

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What you should be doing for a better retirement Twenties People in their first jobs suddenly have to deal with tax and National Insurance and many do not want to have the extra worry of a pension. But there are many advantages to joining a company scheme. The key benefit is that a company often pays into the scheme on the employee's behalf - an instant 5% pay rise - and the sooner money starts filtering in, the longer it has to grow. If you begin a pension in your twenties, you are far less likely to be 50 and frightened of the future, which is how many feel. Story continues ADVERTISEMENT Signing up for a pension in a first job does not tie you to the company for ever. If you switch jobs you can usually leave your fund to grow until retirement. Alternatively, the fund may be transferred to a different pension. Thirties This is the age at which pension planning should be at the front of people's minds - but often isn't. By now you should have joined your employer's pension scheme. But pensions are not the only retirement savings option at this time of life. Tax-free Isas and other savings plans are just as important. And with the new pension rules which came in last week, you can save tax-efficiently with an Isa and then move your money into a pension as you get nearer retirement. This is a good idea for those whose income attracts basic rate tax now, and, therefore, only basic rate tax relief on contributions. Forties Forty is the point you should stop living for the moment and give serious thought to the future. It is also often the age when people first start panicking about pensions. You may have a mish-mash of pension plans you have accumulated from different jobs. You probably don't know what these plans are worth and have perhaps even lost touch with some. Now is the time to get serious and find out just how your pension saving is going and start making more contributions if necessary. If you are in a company pension scheme, you must read your annual statements closely and check for any changes. Savers in this age group who contracted out of the State Second Pension (S2P), formerly known as Serps, and had earnings-linked National Insurance contributions diverted into a personal plan, are being urged by some providers to contract back in to the state scheme. This is because providers fear the private savings plans will not grow enough to beat the state offering. But it is vital to get professional advice. Fifties The children have flown the nest and the mortgage is almost repaid. Well, that is the theory - and, more pressingly, retirement is looming. Under the new pension changes anyone may now save up to 100% of their annual salary - maximum £215,000 in 2006-2007 - so long as the lifetime limit of £1.5m is not exceeded. Any excess will be taxed at 40%. This could also be the time to opt back into S2P as the nearer you get to state retirement age, the easier it is to tell whether the contracted-out fund is on track. While you should be diverting more cash into your pension, it is ironically also the age when you can start drawing on your personal pensions. But few can afford to do so. From April 6, 2010, you will not be able to take a pension before you are 55, however. There are a couple of exceptions: you will still be able to retire early due to poor health, and if you have the right to retire before 50 at April 6, 2006, that right may be protected.

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