Pensions - Setting the Scene

What is the most valuable thing that you will ever own? Your house? A plot of land? Perhaps a particularly fine classic car? Maybe you are one of the lucky few who have a family heirloom such as a painting or a stunning jewel passed down over the generations? Good guesses, but wrong, wrong, wrong.

Almost without exception, the most valuable thing that will ever have your name on it is the pot of money, assets and linked entitlements that will support you through retirement. This pot may include the house, the car and the fine painting. It might also include cash in the bank, pension funds and share portfolios. You may not even realise that some of it exists. Pension rights and entitlements to income in retirement, especially from the state, often have no apparent cash value. Nevertheless, they could be worth a fortune.

Even a couple who retire after a life on low incomes or benefit, with little money saved and who live in rented accommodation can still value their 'retirement pot' in six figures. It would cost well over £100,000 to go out and buy privately the income that a couple receive from the basic state pension alone.

For a middle earner, multiply that valuation tenfold at least. For a top executive, multiply it thirty or forty fold. These are quite staggering sums of money. And they need to be. The mixture of savings and entitlements to income in years to come is all that will support you for the rest of your life. It might need to last twenty, thirty or forty years. Sure, the odd person will get lucky and win the lottery. But probably not your or myself. We have to live off this retirement pot.

New Landscapes

The prospect of a leisured retirement has only been a realistic notion in Britain for the past century or so. Before then, the vast majority of people went on working until they dropped. It is only over the last few generations that significant numbers of men and women have been able to look ahead to retirement and plan for a life after work.

But this planning process has become far more complicated during the last two decades and is likely to remain a challenge for the foreseeable future. Planning ahead is sensibly for retirement has become of the new skills needed to navigate the twenty-first century. Planning is more complex because our lives themselves have become more complex. The social patterns of work and family life have changed. No longer is it typical to join one company and stay there for many years, perhaps even for life. Our careers chop and change.

For better or for worse, family lives to be unpredictable so it's even more important that we ensure our personal finances are in order. And understanding how these changes might affect your future is the first step towards taking control of retirement and getting pension planning right.