Pensions: what is Ben's ideal retirement?

Ben Loader, aged 28, an environmental consultant for a UK water company. Single, lives in central London. (Salary range £25,000 - £35,000)

With a student loan to pay off and hefty rent bills to pay while living in London, Ben has not seen a pension as an immediate concern. In his previous job he had a pension but only paid in the bare minimum. On leaving, his pension valuation stood at £2,000.

Since then he has not had a pension of any sort, though now he is starting to think about setting one up.

"I can see the argument in favour of saving into a pension, but recently I have been focused on paying off existing loans rather than investing in a pension. I just haven't had the spare cash to do it."

He has heard scare stories about under-funded pensions and is aware that when he retires in just under 40 years, the basic state pension may be an extremely insignificant sum. Being under 30, and with most of his working life in front of him, he is not unduly worried by his lack of pension savings, but he is coming round to the idea that he needs to act sooner rather than later.

He adds: "My new company has a pension scheme, which it will contribute to, so I plan to join that and increase my side of the contributions when I can afford to do so. But to be honest in my line of work, the chances are that if I want to get on then I will have to bite the bullet at some point and go self-employed - when that happens there will have to be another rethink about my pension."

Ben also has some expensive hobbies - snowboarding and scuba diving - which he'd love to partake in as an OAP of leisure. Will he have to give these up, now and in the future, to avoid any struggles when he finally retires?

Ben's Pension Time Machine
Verdict: If Ben fails to take out another pension during his working life his total pension fund on retirement will be £6,835 and his projected annual pension income would be a paltry £299.32 (in today's money).

The outlook seems pretty bleak, but in Ben's favour he is still young and has time to make up for the years when he hasn't saved for his retirement.

But he will need to start as soon as possible and try and make contributions as large as he can. Ben does not yet own a property, nor does he have any ISA or unit trust investments, so he needs to put together a plan to avoid being cut off by the gas board aged 65.

A pension (with its tax-free element, and the added benefit of a company matching his contributions) should be one of Ben's first considerations. Even as little as £100 a month into his company pension would be a start, and he could increase this contribution in time as his personal loans are paid off, and his salary is boosted by pay rises or bonuses.

Given that he plans to go self-employed at some time he should consider the benefits of a stakeholder pension or a SIPP (self-invested personal pension) when he makes that move.

His company pension would remain intact (in fact he should be able to transfer its value into the stakeholder plan) and the stakeholder pension would then take its place. He could actually set up a stakeholder scheme to run alongside his company pension now - but given that money is a bit tight - that maybe one for later!

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