I watched a programme on T.V. recently about a pension crisis that we are facing in the U.K. There has also been a lot in the press stating that most of us do not save and plan for our retirement the way we should. Apparently there are 9 million people in the U.K. that have no pension provision at all, presumably relying on the state to fund their retirement. A survey revealed that two-thirds of us over estimate the state pension at £180 a week when in reality it is more like half that amount, and that is assuming you have paid into the system. Currently you will have needed to pay NI contributions for 44 years if your man and 39 years if you are woman. Many people have not achieved this and so will get even less than the basic state pension.

Thought You Had Your Pension Covered?

Ofcourse there are those who have worked hard and been fortunate enough to be with a Company who has had a final salary scheme but even that is no guarantee that your future is safe. Most Companies now have a shortfall in their pension funds. Added to this 9 out of 10 Final Salary schemes have closed down which means that bleak prospects are not only destined for the ones that haven't planned but also for the ones that thought they had planned. In my own case I was made redundant at age 55 giving me a shortfall of the 10 further years in my final salary pension that I thought I would have.

The programme showed Financial and Pension advisors speaking to three different families.

The first was John, he had worked for 28 years and contributed to his company scheme. He thought he would probably be able to expect a pension of around £35-£40,000 a year by the time he retired at 65. Unfortunately he was made redundant, and the reality was, on his contributions he will only receive £230 a week or £12,000 a year. This is a third of what he expected. He had then decided he needed a plan 'B' and paid into a defined contribution private pension scheme. He was paying £10,000 a year into a second pension and had no idea what this would give him. The Pension Advisors worked out that this would give him an extra £28 a week! He retorted that he thought this was day light robbery. He was probably right. He looked a very worried man.

Then there was 57 year old Graham self-employed and looking forward to early retirement. He was paying into a lump sum private pension. He was hoping to look after his grandchildren. When he had a pension statement 2 years ago he had a pension pot of £70,000 but one year later that pension pot had reduced to £50,000. 30-40% smaller than he expected. Graham was seeking advice on what should be his plan 'B'. There didn't seem any answer other than work as long as you can.

The third family was a single parent mum trying to bring up two children on her own. She had no private pension and had been made redundant twice within a few years. She now found hereself with quite a lot of debt as a result of the redundancies. The Advisors told her that she would need to save £500 a month to have a base line minimum of £9,000 a year. She simply can't afford to save that much. When told that she would have to live on the basic state pension of approximately £95 a week, she understandably said it wasn't enough. Her plan 'B' was the equity in her house.

Most of us are unsure how much we need to pay into a pension. If you approach a financial advisor today they will probably quote expected returns of 5% whereas a few years ago they were quoting returns of between 7% and 10%.

If you want to have a pension at the age of 60 of £10,000 a year, or £830 a month, you would need to have a pension pot of £200,000. If you can get a 7% annual return on your investments. Look at the table below to see how much you should be saving depending on your current age.

• A 20 year old should be saving £200 per month.
• A 30 year old should be saving £300 per month.
• A 40 year old should be saving £500 per month.
• A 50 year old should be saving £1,000 per month.
  

No matter how well we plan and save, life has a way of taking unexpected turns and we can find ourselves without the necessary funds that we thought we would have. These are some of the most common:-

1. Redundancy followed by difficulty in getter another job of equal status.
2. The company that had most of our pension pot has gone into liquidation.
3. Illness that has limited out working life.
4. Responsibilities as carers to loved ones which we hadn't anticipated, limiting our working hours and financial investment.

Even those with what they thought was a good pension have seen 25% of their value wiped off the scheme since the start of the credit crunch.

What's Your Plan 'B'?

A recent article in the DailyTelegraph written by Tom Stevenson contained lots of staggering statistics but the final paragraph gave me some hope for my future.

"My final tip is, if you can, to earn your living doing something you enjoy so much that you won't want to stop or which you can continue part-time. Remember even £5,000 a year from a part-time job is £100,000 you don't need in your pension pot."

I'm a 63 year old baby boomer who had my pension crisis 3 years ago when I realised I could not have the retirement that I dreamed of on the amount I had in my pension pot. That was because life had intervened when I was made redundant at the age of 55, which robbed me of at least 10 years more in the Company's final salary pension scheme that I had planned for. I worked freelance for a few years but was never able to top up my pension pot to the level it would have been had I continued in that job.

My plight made me start thinking of alternative ways to subsidise my income and then I realised I had the answer already in something I had treated as a hobby. My interest in natural health products led me into a network marketing company which until recently failed to produce the income that it promised. However it was the only plan 'B' that I had, so I had to find a way to make it work. Six months ago I turned my interest into a profitable part-time business with something called "Attraction Marketing." With the development of the internet over the last few years I learnt how to put my home business on the internet and turn it around. I know that this is something I can continue to do in my dotage.

If you haven't got a plan 'B' I suggest you find one as a matter of urgency. I found a training resource that led me click by click on how to put my business on the internet. You can find information on this at my blog if you're interested. Network marketing is a way of having your own business for a very small investment with little or no risk.  What's really attractive about network marketing is that you build up a residual income by building a team.  When you get to a certain level your income just keeps growing whether you're working or not.

There are lots of network marketing companies around. Choose a product that you're interested in and can have some fun with. Make sure you choose a reputable Network Marketing Company that's been around for a few years. A word of warning though make sure you choose your sponsor with care. Your sponsor will be what is referred to as your "Upline" that's your Manager to you and me. This is the person who will train you and show you how it all works. Make sure the sponsor you choose is teaching the new method of "Attraction Marketing" that will show you how to put your business on the internet. Don't sign up with anyone who tells you to make a list of 100 friends and family and then start prospecting them. Don't sign up with anyone that tells you to make cold calls or push cards through doors. If you do your plan 'B' is likely to disappoint you and your likely to alienate all your friends and family.

If network marketing isn't up your street there are lots of other ways of earning money either online or offline. I found a brilliant hub of a fellow hubber giving lots of ideas and possibilities on how to finance your retirement. Finance Your Retirement by Building Side Incomes.

Perhaps you have a hobby you could turn into a business. The internet can be used to market any business using mostly free social networking sites. With the right help it's really easy. Do it in the comfort of your own home without being restricted to the 9-5 routine. Fit it around those leisure activities you intended to enjoy when you retired. Choose a business where you can give up the day job and and look forward to doing all the things you planned to do and more knowing you can continue creating income. Remember earning as little as £5,000 a year can be the equivalent of £100,000 in your pension pot.

Continuing to earn money doesn't necessarilly mean that you have to carry on what you've done for the last 45 years. Look upon it as an opportunity to do something completely different.

But whatever you do don't rely on the pension!