What if you don’t join company pension scheme?

You might want to consider a personal pension . While you obviously will not get a contribution from an employer, there is the incentive of tax relief from the government.

So generally, for every £80 you pay into your pension, you end up with £100 in your pension pot.

Personal pensions are purchased from a provider such as an insurance company, High Street bank, building society or most typically, a pension company.

When you invest in your personal pension, there are no guarantees of returns and the value of your investments can fall as well as rise. So advisers generally say you should move investments to somewhere safe in the run-up to retirement, even if the returns are not as good.

Is my state pension affected by all these changes?

No, this is a separate debate – although some of the fundamental issues are the same.

The pension age is the time when you can start collecting your state pension. This may come later than your retirement age – when you finish work and cash in your other pensions.

The government is to hold a formal consultation to set the date at which the state pension age starts to rise to 66. It will not be sooner than 2016 for men and 2020 for women.

The Labour government was planning to make the same change, but with a much longer timescale, starting in 2024.

The new coalition government also wants, by October 2011, to scrap a rule that means you can be told to retire at 65 by your employer, even if you do not want to.

All of this sounds as though my retirement years and income are shrinking. Why?

All this relates to the fundamental issues raised earlier – namely that we are all living for longer and the population is growing.

This means a smaller proportion of working people are supporting larger numbers of retired people – bearing in mind that they have been paying their taxes and National Insurance for years.

For companies, this means pension pots need to pay for more and more people. On top of this, the recession hit the value of these investments.

Many invest in big companies, and when their share price falls – as has been the case with BP – then the financial position of these pension funds are hit too.