How to choose the pension that's right for you

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We should all save for our retirement but most of us tend to put it off for as long as possible. The truth is if you don't want to spend your retirement broke then you should start making arrangements now, but with so many choices where do you put your hard earned cash?

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If you work it means you are probably building up a pension already. Your national insurance contributions will be steadily accumulating for your retirement. The problem is, although you will qualify for a pension at the end of your working life, it may not be enough to keep you in the style of life you would prefer. This is because it's not means tested and therefore doesn't reflect the cost of living. The state pension currently stands at £95.00 per week. You will also need to work for 30 years before qualify. If you want to boost the amount you receive then you will need to make additional contributions or delay the start.

The sooner you start paying into a pension the higher your income in retirement is likely to be. The longer you leave it to start saving the higher your contributions will have to be to get a decent return.

There are three main types of private pension: The stakeholder, personal pension, and self-invested personal pensions.

The stakeholder pension was introduced by the government to supplement the state pension. They are a pension for those who do not have access to a company scheme. The money you pay in will be invested in stocks and shares but there is only a limited degree of risk. They are a low cost (contributions as little as £20), low risk option that offers flexibility.

A personal pension plan requires you to pay a regular amount or a lump sum to a pension provider who will invest the funds as they see fit. Personal pensions are normally provided by insurance companies, building societies or banks. If you are considering a personal pension take some advice from an independent financial advisor, they can be quite complicated.

If you want a little more control over your money then you may decide on a self-invested pension plan (Sipp). You can choose how you invest your money from a range of shares, funds and property. Most schemes will offer you the flexibility of moving your savings should you require but it's best to check with your financial advisor before committing to a scheme as some have more risk attached than others.

From 2012, employers will have to enrol their employees into a pension scheme as part of the Government's plan to save people from poverty in retirement. Those not affected will be those younger than 22, older than state pension age or earning less than £5000 a year.