If You Want a Decent Retirement, Then Begin Pension Planning in Your Late Twenties

If you're coming straight out of university or even in your mid 20's, then you know it's a tough time with high rent, wage freezes and high unemployment in the 'youth' age group.

Setting out plans for a pension should also be added to the list of problems, an ageing population and retirement ages being raised slowly, with the mandatory age being scrapped. All this means the state pension alone will be nowhere near enough to live comfortably on in 50 years, if current trends are anything to go by.

The pension age calculator on the UK governments Directgov site calculates that a 26 year old (born in the year 1984) will be able to retire at 68 years old, in the year 2052.

Fast forwarding to 2052, if the state pension rate is by some miracle roughly the same level as it is today (£97.65 weekly, by this I mean the equivalent after inflation, if it stays at £97.65 in 2052 then we've got very serious problems!) then it would be ok, nothing to write home about but not the terrible pittance doom mongers say it will be, if you're debt and mortgage free that is.

Getting to retirement debt free is less and less likely to occur however, so having a pension fund established from the very get go of your career should really be considered. As soon as you have enough disposable income, making payments into a pension pot should be a no brainer, there are numerous options and routes you can go down; so make sure you receive expert advice and know the small print and terms inside out before signing any contracts.

The majority of people just end up entering their employers' joint contribution pension scheme, if they can get in that is. It's been a headline news story for years that the major and blue chip companies are closing the doors to new employees when it comes to the pension scheme.

If the last two decades have shown and sounded the death knell for final salary pension funds, they've become too costly to maintain for companies. Meaning anyone who is not already on board and contributing is left to make their own pension arrangements, this inevitably leads us to the high street building societies and banks.

With no employer run pension scheme to join, many have to turn to the minefield of the open pension market, and it can be difficult to navigate, don't expect any help from comparison websites or other modern tools to help make the search easier. However, there are benefits to be found that an employer scheme would not have, banks, insurers and building societies have greater scope to personalise plans to the individual.

Of course, you're only going to get information for that institutions products branch to branch and biased advice to make you sign up with them, you cannot be sure what the best advice is. This is one area you want to be certain about, as mistakes you make now you could only realise decades later. Seeking an independent expert for advice is the best course, with a market as complicated as this, with choices to be made between stakeholder plans to Sipps, being fully informed by an expert should be the only course to take.

An IFA (Independent Financial Advisor) will save time and money in the long term when it comes to setting up your pension. Shopping around your local area for the best qualified, most experienced IFA should be the very first step. When you've found someone you like, the usually complex market should become less hazy and easier to understand with the help of an IFA.


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