What you may have heard about pensions

The retirement landscape has changed over the last few decades and you may have heard many things about pensions. Here are a few of the issues you may have heard or read about.

My state pension may not be enough

The increase in average life expectancy over recent decades has put pressure on the ability of the state to provide the level of pension income most people would like to retire on.

Currently, if you were single and retired this tax year (2010/11), you would only receive a maximum weekly basic state pension of £97.65 - equal to £13.95 per day. Many people could find this income level difficult to live on.

The question to ask yourself is what will the state be able to pay you when you retire?

I may have to work longer

If you were single and retired this tax year (2010/11), you would only receive a maximum weekly basic state pension of £97.65 - equal to £13.95 per day.

The increase in average life expectancy over recent years means many people may have to wait longer to help pay for their retirement. The average retirement is expected to last 20 years or more.

And if you're a woman and relying on state pension provision alone then soon you will have to work until you're 65 before you can claim your basic state pension - read more about the state retirement age.

Some companies are closing their final salary schemes

True, over the last few years many companies have closed certain types of pension schemes, but to new entrants. These schemes, known as final salary or defined benefit, promise to give you a guaranteed pension primarily based on your salary and the number of years in your employer's scheme.

These types of schemes are becoming more expensive for employers as a result of falling stock markets and increasing life expectancy.

As a result, new members will be offered access to a money purchase scheme, where the investment risk switches to the members. In most cases, existing members have remained in the schemes.

Pension funds have not performed well recently

Many pension funds depend on steady stock market returns to pay pensioners but recent volatility in stock market returns has had an effect on pensions.

However, it's key to remember that saving in a pension for retirement is a long-term strategy. While the value of your pension fund may fluctuate over the short term, it's the medium to long-term performance that's important for your retirement.

That I should prepare for my retirement as much as possible

It's true that these days, more and more seems to be written about retirement and the need to plan for it. Newspapers and governments have brought to our attention the fact that we may not simply be able to rely on the state to provide for us when we retire.

Instead, with increasing average life expectancy, we should be planning early, and looking at other ways of providing an income when we stop working.

There are many ways to help boost your retirement income to what you think is a suitable level, and you can find out about some of them here on our website.

You can also try our Retirement Calculator to see if your retirement income will be enough to fund the retirement you would like.