Pensions are not enough

If predictions about the UK's pensions crisis are accurate, then many people who have saved throughout their working lives face a poor retirement because they simply haven't saved enough.

The only way to avoid this - bar a huge windfall - is to save outside of your pension, or top it up as much as you can.

If you've plenty of other things to spend your money on, this is not a palatable thought, a view backed up by research from Birmingham Midshires, a savings provider and lender.

Yesterday it revealed research showing that only 12% of people bother to save cash outside of their pension.

So, what are the solutions?

Topping up your pension

If you're in a company plan, you may be able to top up your contributions. The best schemes involve those where your employer matches your contributions.

"If you can't save, this is your best bet and is also most efficient for highest tax payers," says Nikki Foster, savings and investments manager for independent financial advisers (IFA) Chase de Vere.

How much should I pay into a pension?

Roddy Kohn, of Bristol-based IFA Kohn Cougar, suggests those under 30 should be putting at least 20% of their net pay into a pension.

"The younger you start, the better. Your contributions need to achieve the same level double every five years because you're missing out on growth and tax relief."

What return can I expect?

Most pension companies provide a lump sum tax-free and 75% of the remaining fund as an annuity. The money you'll receive can appear paltry and some believe that, because investment rates are falling, it could get worse.

Legal & General says a 25-year-old paying ?100 a month into a pension can expect a retirement pot of ?12,000 at age 60. A 40-year-old would need to pay an extra ?214 and a 50-year-old an extra ?800 a month.

What about a stakeholder pension?

If you don't have a pension and want to start one, chances are you'll be best off with a stakeholder plan from a solid provider such as Norwich Union or Standard Life. Charges are lower than for a personal plan but you'll almost certainly receive a worse return than from a company scheme.

Saving outside a pension

If you're disciplined, you could be better off putting your money into other investments. The benefits are you can get at the money any time - but there is no point if you plan to blow the money before you retire.

Shares

If you're saving for the long term, the stock market is historically the best bet - although it carries no guarantees. It's also a long-term savings option.

Cash

If you want your money tied up for less than five years, keep it in cash. Whatever you choose, try to keep at least three months' in cash in a high interest savings account - check the online providers' rates, they tend to be best.

Mini cash individual savings accounts (Isas) are always a good bet - find one paying a good rate and you can stash away up to ?3,000 a year.

Look out for products such as guaranteed equity bonds - Skipton Building Society and Bristol & West are solid providers. Your money will be tied up for an average of five years, but they can produce better returns than most savings accounts and your capital is safe.

Pensions versus Isas

Experts will tend to recommend both. The older you are the more difficult you'll find it is to bump up a pension. So stash money into Isas and bonds .

Virgin Direct gives the example of a 30-year-old man paying ?1,800 a year as a basic rate taxpayer into both a personal pension and an Isa. If he were to retire at 65, his pension would provide 48% more income each year than his Isa.

But, if the same man planned to retire at 50, annuity rates tend to be less generous the younger you are, so the Isa could actually provide better income at retirement.

What about property?

Buying a second property can be a valuable investment. There are plenty of good buy-to-let mortgage deals on the market, but you need to be aware of all the risks involved.

The tough part is saving up for the deposit - often at least 15% of the price. But ask anyone who bought a home in the south-east in the last couple of years how they feel about their investment, and chances are they'll be happy with it.

If you're a higher rate taxpayer, a pension tends to be more efficient, says Ms Foster.