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Last Updated: Wednesday, 5 October 2005, 09:58 GMT 10:58 UK
Ten golden pension rules
By Malcolm McLean
Chief executive of the Pensions Advisory Service (Opas)

Malcolm McLean, chief executive of the Pensions Advisory Service
Malcolm McLean runs a pensions helpline

The Pensions Commission report revealed the extent of the UK's retirement shortfall. A pensions expert outlines ten simple steps to securing a comfortable retirement.

Don't count on the state

As a nation, we are all living longer.

This means that in the years to come, there will be many more pensioners than now and the value of the basic state pension may struggle to keep pace.

Don't put off starting a pension

Why many are heading for poverty in old age

Because of the way compound interest works, the earlier you start a pension plan, the less it will cost you.

So start early and pay in as much as you can.

As a rule of thumb, a good starting point would be about half your age as a percentage of your income.

So at 22, that would mean 11% of your income but if you cannot afford that much any lower amount would be useful as a start.

Explore other ways to save

Property, individual savings accounts (ISAs), even paintings and other works of art are all possible alternatives.

Try to make yourself familiar with the rules of your scheme and how it works

Indeed the more you diversify your investments, the better it usually is.

However, with an approved pension plan you receive tax relief on all your contributions at your highest personal rate. And for the most part, the fund that you build up is also allowed to grow tax free.

Show an interest in your pension

Try to make yourself familiar with the rules of your scheme and how it works.

Make sure you know with a personal pension or money purchase type company scheme what investment vehicle is being used for your monies and make sure you are comfortable with the level of risk chosen.

Join your employer scheme

Always consider joining your workplace pension scheme, the employer will be contributing and for you not to join is therefore tantamount to giving up pay.

One exception might be in a salary-related scheme if the company were to be financially insecure and in risk of becoming insolvent.

With the advent of the pension protection fund next year, however, some of the risks for members will be considerably reduced.

Unless you feel very confident, always take professional advice before making important decisions

Review your pension regularly

You should check the regular pension statements you receive to make sure your plan is on course to deliver the level of income you expect to receive when you retire.

Get a forecast of your state pension

This will enable you to establish whether there are any gaps in your National Insurance contributions record and gives you the opportunity of making this good by paying voluntary contributions.

Give yourself time to act and get a forecast at least ten years before you are due to retire.

To obtain a forecast, ring the Pensions Forecasting Service on 0845 3000168

Keep paperwork safe

These papers may be essential later on.

It is no use trying to challenge something or for example make out a case for mis-selling without the necessary evidence some 20, 30 or 40 years after the event.

Take professional advice

Unless you feel very confident, always take professional advice before making important decisions, such as changing your pension provider or seeking a transfer.

If you do not have a regular financial adviser you can obtain details of three advisers in your area by contacting IFA Promotions on 0800 0853250.

For free advice on issues other than investment and guidance generally, you can also ring the OPAS Helpline on 0845 6012923.

Always ask questions

Remember, there is no such thing as a stupid question about pensions

Pensions can be immensely complicated and people sometimes feel inadequate.

You should not worry about this.

You have a right to have things properly explained to you in language you can understand and should not feel inhibited about asking the most basic questions.

Opas are running a free helpline for women with pension problems the number is 0845 600 0806.

The views expressed are solely those of Malcolm McLean's and not the BBC's. Any guidance is for general information only and does not constitute financial or legal advice.

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