So who should be saving?

Just about everyone, except for the very low paid, who will never be able to lift themselves above the level of the pension credit.

How much can you save?

Since reforms in 2006 you can now put as much as 100% of your salary into a pension each year. This is good news for people who need to catch up as they near retirement. However, younger people should consider following Adrian Boulding’s strategy of a percentage of your earnings equal to half your age.

Pensions for all the family

If a member of your family is a non-earner – perhaps a spouse looking after young children – you may be able to pay a contribution for them up to £3,600, which will benefit from basic rate tax relief, costing you £2,880 a year (2008-9). 

The same applies to children, so better-off families who do not require Child Benefit, for instance, to meet everyday needs could consider putting it towards a pension for the child.

Under current pension rules, the child will not be able to access the money until he or she is a minimum of 55 years old, but a contribution paid each month until the child is aged 18 could mean that the child’s pension needs are well on the way to being taken care of before he or she even joins the workforce.

For example, if a parent or grandparent paid £100 each month (net) into a pension plan set up for a newborn baby for 18 years, the projected fund after 47 years – when the child reaches the age of 65 – is £139,000 (in today’s terms), which could provide a pension of £435 per month (in today’s terms).

If the grandchild continued paying £100 per month after 18 years until his retirement at 65, the projected fund would be £216,000 (in today’s terms), which could provide a pension of £673 per month (in today’s terms).

http://www.legalandgeneral.com/calculators/familyCalc.jsp

(State pension figures updated April 2008).

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