Never more crucial to act now on pensions

trouble. After all, the average UK salary is a relatively modest £26,364.

If you qualify for a full state pension, then you would get just over £8,000 at current rates.

It is reckoned that to reach the remaining £12,000 of an overall £20,000 target someone who starts saving at the age of 25 would have to put away £246 a month, net of tax. After 20 per cent tax relief, that sum is actually worth £307.

To make it happen the individual would have to contribute 14 per cent of their salary.

If they leave it to 35, they would need to contribute 23 per cent. If they don’t start until 45 it would eat up near enough half their earnings.

“The biggest message from our analysis is the cost of delaying when you start to save,” said Patrick Bloomfield, a partner at Hymans Robertson.

“The challenge is, when they’re in their 20s and 30s people are trying to save, they’re trying to get on the housing ladder, they’re being young and having fun. There are lots of calls on that money.”

However, I have come up with a few tips which might help:

40 per cent tax relief is available for individuals earning in excess of £43,000, though that might not be around for long as higher rate tax relief is on the radar of the Chancellor. Although I am not advocating a case of ‘buy now whilst stocks last’ it is worth noting that currently a £100 gross contribution has an effective net cost of £60 per month.

Utilise the option to carry forward any unused relief from the previous three years. Circumstances change, so don’t miss out.

For individuals who earn between £100,000 and £122,000, the income tax personal allowance is gradually reduced and eventually lost. The effective rate of income tax is then 60 per cent. Make a pension contribution against this band of earnings and receive tax relief at this effective rate.

Obtain a state pension forecast and ensure you are funded to date. If not, do something about it urgently. The new flat rate pension is £155 per week based on 35 years’ service.

The trouble is that post the financial crisis of 2007/8 many people are not heeding the warnings from across the financial services industry. They stared into the abyss and did not like what they saw.

Nigel Green, the founder and chief executive of deVere Group, commented: “The ‘head in the sand’ mentality when it comes to saving for retirement is very concerning.

“This is particularly the case because we’re living longer, meaning the money we accumulate has to last longer.

“In the future, it’s unlikely that governments will be able to support older people like they have done for previous generations given a looming health and social care crisis and growing deficits in company pension schemes.” I would endorse those comments.

The message is – act now or you may well live to regret it. Trevor Law is managing director of Merito Financial Services, chartered financial planners,

based in Solihull. Email:tilaw@meritofs.com