Funding a decent income

When making plans to start any pension plan, the first thing to consider is how much income you think you will need. Few people need as much income in retirement as they do while working – the mortgage may be paid off, children will likely have left home and day-to-day expenses will probably fall. However, with more leisure time available, you may have some ambitious plans for travel. All this needs to be considered so you can set some realistic expectations. Once this target figure has been determined, you can then begin to decide how much needs to come from a pension and how much can come from other means. For example, the state pension is £97.65 a week (for 2010/11), plus you may have money in ISAs or from rent from second properties. You may also decide to work part time or take some other type of temporary paid employment. Pension plan savings are then the first step in working out how to make up the difference. Unless you already have a significant work or personal pension arrangement in place, some form of additional saving will be required to meet your target. Just to give you an idea, using annuity best buy tables published in April 2010, because interest rates are at very low levels, £10,000 worth of annual income for a male aged 65 (with no guarantees built in) will require a pension fund valued at over £150,000. For females - or for those wanting to retire earlier than 65 - the fund required will be even higher. Hence the need to start planning and the earlier you start, the easier reaching your target will be.