When I retire in twenty or thirty years’ time there will be little or no state pension for me, (or for you if you are under 50).
Why? Because we have an ageing population, a huge national debt and there won’t be enough younger people paying taxes to support the cost of keeping us all in retirement.
The pensions problem is a massive iceberg that no political party wants to tackle, but which we are sailing towards at a frightening rate. The new government flagged up last week that the retirement age would rise and that we would all be working longer.
Governments are wary about being frank about the size of the problem, and pensions ministers seem to change as frequently as Premiership managers.
When faced with certain shipwreck, grab a life-raft. This could be a personal pension, your employer’s pension scheme, a stakeholder pension or a savings account like an Individual Savings Account (Isa). Start now, and start paying in as much as you can afford.
To build up a decent fund you need to adopt the strategy of Paying Yourself First. There are many variations on this theme but the basic principle is that you put money away as soon as you are paid and before you pay your bills, your taxes and any other treats and expenses.
That is, you have a sum of money that leaves your account automatically by direct debit on payday, before you have a chance to get your mits on it and before you can spend it elsewhere.
You can do this via a pension scheme at work, a regular savings account to a bank or building society, a regular monthly contribution to a share-based fund like a investment or unit trust, or contributions to an Isa.
Once it’s gone, you can’t spend it, and it will be quietly making money for you in terms of equity capital growth or interest. Before you know it, you’ll have a reasonable fund.