New state pension age: when will you retire?

For many years the age at which you can claim your state Pension benefits has been 65 for men and 60 for women.

But the previous Labour government set out plans, based on recommendations from Lord Turner, to steadily increase the state Pension age to 68 for both men and women over the next four decades.

In May, the new coalition Government initially signalled its intent to speed up the process, bringing forward the first rise to 66 for men from 2026 to 2016.

In the end, the Comprehensive Spending Review in October 2010 settled on a less radical option, confirming the rise to 66 for both men and women would come by 2020.

However, the Government said it will have to rise even higher in following years. This could see many Britons working today wait until age 68 or even 70 before they get their state Pension.

- Latest: State Pension age will rise to 66 by 2020

For women, the new rules mean much more dramatic rises than feared. It had been expected that the women's state Pension age would rise to 65 by 2020. It will now move to 65 by 2018 and then be hiked to 66 (same as men) by 2020.

The previous Labour government's policy had been to raise the state Pension age to 66 by 2026 and then incrementally to 68 by 2046. Retirement was due to equalise for men and women at 65 by 2020, rise to 66 between 2024 and 2026, 67 between 2034 and 2036, and 68 between 2044 and 2046.

›› When will I retire, then?

All men and women under 56 will have to wait at least until 66 before they can retire.

Those born between April 1950 and April 1954 will have their own specific retirement dates that will gradually increase (see below).

After that, we must rely on Labour's existing plans until the Government makes its next move. See our rough guide to what it means for you below:

MEN - a rough guide

• Under 32s................................. can get state Pension at 68*

• Aged between 32 and 41....................... can get state Pension at 67*

• Aged between 42 and 56.........................can get state Pension at 66

• Aged between 56 and 57.......can get state Pension at 65 + (see below)

• Older than 57......................can get state Pension at 65

WOMEN - a (very) rough guide

• Under 32s..................................can get state Pension at 68*

• Aged between 32 and 41.......................can get state Pension at 67*

• Aged between 42 and 57....................can get state Pension at 66

• Aged between 56 and 60.......can get state Pension at 60-65 (see below)

• Older than 60..............can get state Pension at 60

*Warning! These changes are under review and will be altered by the coalition Government. Expect further announcements 'in due course', they say.

So about if I was born between 1950 and and 1954?

Because the state Pension age will be increasing gradually between 2010 and 2020, many men and women will retire at different ages.

The last women to retire at 60 has already done so. Between now and 2016 the retirement age for women will rise to around 63. Then between 2016 and 2018 it will rise to 65.

Then, between 2018 and 2020, the retirement age for both men and women will rise to 66.

After an agonising delay (during which This is Money made its own rough estimate while waiting for the Government to act), the Department for Work and Pensions has finally released the exact new state Pension ages.

Note that these proposed changes to the timetable are not yet law and still require the approval of Parliament (as of November 2010).

Read the full report: Official state Pension ages revealed at last

Existing timetable for women:

New changes for women only:

New changes for women AND men

Soon, you should be able to find out exactly when you will be able to claim your State Pension by going to the Pension Service website calculator. [Yet to be updated following the Spending Review changes].

The coalition Government is consulting on making these further rises. Read more about the proposals below.

• GUIDE: The State Pension

Moving retirement above 65

The new plan The Pension age for both men and women will rise to 66 by 2020 - much sooner than the 2026 target set by Labour. Rises to 68 are expected to be announced soon, with age 70 on the horizon. The previous reforms would have increased Pension ages gradually, by two years every decade.

There are suggestions that the state Pension age could be linked so that it rises with life expectancy, although this will not be 'crude' relationship, the Government says.

Experts reckon that a target of 70 could be in the Government's mind. Although any changes to that age will be implemented over a longer time period.

Your choices at state Pension age

When you reach the milestone of the state Pension age, you essentially have three choices.

• Cease your working life and get your state Pension

• Continue to work and receive your state Pension as well

• Carry on working and hold off claiming your state Pension

In regards to the final option, if you postpone claiming your state Pension, you may get extra state Pension when you do finally decide to claim it. And you can put off taking it for as long as you like.

Editor's Blog: Will the retirement age be raised to 70?

When you do eventually decide to take your state Pension, you can choose to receive either extra state Pension for the rest of your life, or receive a one-off, taxable lump-sum payment, equivalent to the benefits you put off claiming plus interest - as well as your regular weekly state Pension.

In addition, you can also choose to stop claiming it after having claimed it for a period. And remember, if you carry on working after state Pension age, you don't have to carry on paying National Insurance contributions (Nics).

• For further information on the state Pension and changes to the Pension rules visit Directgov.

›› This is Money has teamed up with our sister title MailOnline to create a new wealth check tool - powered by Pensiontracker - that will calculate how much you need to save for retirement: ›› 2 minute Pension healthcheck calculator

Updated November 2010, Dan Hyde, This is Money

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Read more: Pension

Pension hope for babyboomer generation

The top rates on annuities – the product retirees buy to turn a pension pot into an income – held steady last month, temporarily halting their downward spiral.

It points towards potential breathing space for a generation of 'babyboomers' approaching retirement.

A raft of scare stories over the summer suggested that millions of over 50s are on a 'collision course with an impoverished retirement'. Almost eight in ten are set to receive an annual income of just £8,000, it was predicted.

And after decades of annuity rates drifting unabatedly downwards, even a £100,000 pension pot now only equates to an income of £5,630 a year for a couple.

With the help of annuities expert, Billy Burrows at Burrows & Cummins, we take a look at what's going on.

What are annuities?

Annuities are like insurance in reverse – you pay a lump sum (your pension pot) and get monthly payments in return, guaranteed for the rest of your life.

When you hand over your life savings, an insurance company invests your pot into 'safe' assets. More often than not, these will be government bonds, known as 'gilts'.

This means the rates offered to newly retiring pensioners are largely dependent on the return – or yield – gilts are providing at the time.

What is this 'hope' for rates?

Encouragingly for those preparing to buy an annuity, the gilts yields firmed this month.

This has been helped, in part, by confidence in the stock market, with the FTSE 100 rising by 100 points since late September. With markets climbing, investors have sold 'safe' gilts, and bought more volatile shares. This pushes the price of gilts down but the yield - which is like the interest rate on any other bond - up.

The news that the UK economy grew by 0.8% in the last quarter is a good example of how this works. The positive news saw investors sell gilts, spiking the yields to a new one-month high.

Billy Burrows, an annuity expert with Burrows & Cummins, says the trend has brightened the outlook for over 60s looking into annuity purchases.

He says: 'This year it seems that yields are increasing so perhaps there is a chance that rates will increase, albeit by a small margin. But I don't think it is sensible deferring an annuity purchase in hope for higher rates because any gains will be modest.'

Why are rates so low?

For nearly twenty years now, annuity rates have been in seemingly terminal decline. Back in 1991, a £100,000 pot could have secured an standard annuity income of over £15,000 a year. In June, the level fell below £6,000. Check out the graph below for a snapshot.

Billy Burrows' benchmark measure of annuity rates shows that the average has declined by significantly over the last twelve months.

Billy Burrows: Expert annuity advice

A year ago, if a man 65 with a £100,000 pension pot and purchased a joint life annuity for him and his wife, aged 60, he would receive around £6,000 per annum. Today that same annuity pays just £5,630 - a fall of 6% over the past twelve months.

That wasn't helped by sudden cuts in bond yields in August, which sent rates plummeting by about 1% on average.

Yet, according to Burrows, things have stabilised because Canada Life – one of the biggest players in the annuity market – has held its rates firm since July.

In his regular annuity rates round-up for This is Money, Burrows wrote: 'Recently, bond yields have risen and Aviva increased rates, but then (18 October) Canada Life cuts its rates. Annuities are like a see-saw - one minute up, the next minute down.

One of the factors leading to Canada's cut will have been the need to reduce the level of new sales as it was top of the best tables for September and first half of October. Burrows says a lack of competition is also a major downward force on rates.

He says: 'For standard annuities there are only three competitive companies; Aviva, Canada Life and L&G and the lack of competition removes some of the incentive to increase rates.'

What can you do?

Be aware that there are many types of annuity. Standard annuities pay a set income that doesn't change for the rest of your life; inflation-linked annuities rise with prices of goods; and investment-linked annuities that depend on stock market performance.

Also be aware that annuity providers vary greatly in the rates they offer. You have the right to shop around for the best.

Add to that, huge swathes of pensioners don't realise they could get an annuity boost if they have health problems. Even smoking or minor blood pressure troubles qualifies you for an 'enhanced annuity', with the difference between standard and enhanced rates as much as 24%, according to annuity specialists MGM Advantage.

Craig Fazzini-Jones, of MGM, says: 'The gulf between the best and worst annuity rates for conventional and enhanced products is becoming wider, and with rates in general falling it's more important than ever to consider alternative retirement income solutions that can really make the most of people's retirement savings.

Billy Burrows says significant rises in annuity rates are extremely unlikely. His tip is to look into locking part of your pension pot into an investment-linked annuity to boost returns, while leaving the majority in a safer lifetime income product.

›› More: Latest annuity rate news and predictions:

'The logic is that if an annuity is a long-term product, it should be backed by a suitable long-term investment,' he says.

'There are basically three types of investment linked annuities; MGM's Flexible Investment Linked Annuity, Prudential's income Choice and Sun Life Financial's i2live annuity. They all provide an income for life where future payments will rise or fall depending on future returns. They have a level of guaranteed income to protect investors from a stock market crash and they allow the flexibility to change the amount of income payments or buy a different type of annuity in the future.'

- Read Billy Burrows' free guide to investment-linked annuities for more information.

Read more: Pension

Pension vs Isa: The big debate

Everyone from granny to graduate has a view - but for most of us these days, Isas rule supreme.

And they dominant the savings world for very good reasons.

Ask yourself this: how many ways can you save money, get instant access to your cash, and enjoy protection from the Government's tax-grabbing mitts?

Answers on a postcard please (clue: pensions ain't one of them).

With the amount you can save each year raised to £10,200, a maximum of £5,100 in cash, savvy savers have quickly come to regard Isas as long-term homes for their nest eggs.

But what about pensions? Are they still worthwhile?

A few years ago, the final salary pension was a mainstay of the British workplace. And that certainly was worthwhile. Millions of workers knew they would retire in comfort, which often meant two-thirds of their final income.

But such bounteous company perks have died a ghastly and painful death in the 21st Century.

We're left with a barren landscape of 'defined contribution' schemes, where retirement income depends on how much you save and how fast this grows.

And yet around 14m people in Britain still have a pension. The industry is still firing on (most of its) cylinders, too. Surely there must be benefits?

Right. There are. One is a new ability to inherit your forefathers' savings or pass on yours. Soon you'll be able to convert up to 100% of pots into cash once you hit 55 and leave any unused money to your loved ones on death.

But you've been able to do that with Isas for ages. So back to the big debate - what's the verdict? Isa or pension? We asked five independent experts for the lowdown.

We want you to get involved in the Big pension vs Isa debate, too. What do you reckon? Leave your thoughts in the reader comments at the bottom of this page.

• PENSIONS

pension pros:

- Tax relief

When you pay money into a pension the Government refunds the income tax you paid on it. Effectively, basic rate taxpayers only need to put in £80 to see £100 go into their pot; 40% taxpayers only need to put in £60 to see £100 added. When you draw on your pension you are taxed at income levels again. But in all probability you are going to have a smaller income and usually this means basic rate tax. According to Lorreine Kennedy, an adviser at Care Matters, this could mean you're 33% better off than with an Isa.

- High contribution limits

Work bonus: Many employers contribute to their workers' pensions

Pensions have high annual contribution limits of 100% of earnings, subject to an overall cap of £255,000.

- Employee benefits

Many companies have a staff pension scheme. Lots of these used to be generous, 'gold-plated' final salary arrangements. But now most depend on you sacrificing chunks of your salary and watching a pot grow (slowly).

However, most employers will at least match your pension contributions - some even put in more. So if you contribute, say, 6% your employer might put in another 6% or even 8%. Look at this as a pay rise - it'd be madness to say no.

And as Peter McGahan, of Worldwide Financial Planning, points out, you can save on National insurance, too. 'With a pension you can elect for a salary sacrifice which will allow you to avoid National insurance of 11%,' he says. 'So a basic rate tax payer could have tax relief at 20% on the contribution plus 11% national insurance saving. An Isa doesn't have any of these tax luxuries.'

- Tax-free growth

Virtually tax free growth within the fund. That should mean your money's safely stored away from the Government's prying eyes. pension funds did used to get dividend tax credits. But Gordon Brown axed this bonus in 1997. The move is said to have cost pension funds around £5bn a year. So much for 'safely stored', then.

›› Video: Are pensions worth the effort?

pension cons

- Not accessible until 55

This is where a pension falls down; you do not have immediate access to your cash in a time of crisis. Any money in a pension cannot be accessed until you reach 55. And even then, you will need to purchase an annuity – an insurance product that pays a set income for the rest of your life - unless you have a pretty large pot (size to be decided by the Government). [Read more on this here]

- They're complicated

Pensions are difficult to understand and are run in complex ways. This can be very off-putting for ordinary savers who just want to know how much they need to put aside and what they'll get back in old age.

- Government meddling

Raid: Gordon Brown has been accused of damaging pension pots

Watch out, Brown/Cameron/Blair/Thatcher (insert your PM of choice here) is about! Past governments have tinkered and fudged the pensions system to no end. It's made it difficult for savers to feel that their nest eggs are secure.

- Why it's time to take politics out of pensions

And this could keep happening, says David Thurlow: 'You can't access your pension fund until the Government says you can – this used to be 50, has recently been increased to 55 but could rise again. At present, you are allowed to take 25% of the pension fund as a tax free lump sum, but again, it is possible that a future government could abolish or restrict availability of this.'

• ISAS

Isa pros

Flexible options

Isas come in two types: a cash Isas (basically a savings account) and stocks and shares Isas (a wrapper that you can either place individual shares in, or more often a fund that will pick shares and bonds on your behalf).

- Read more: How to pick the best Isa

- Instant access

This is what makes Isas such winners. With both cash and shares Isas, you can get at your money as and when you want. Even fixed-rate cash Isas only see your money tied up for a few years. For those keen to ensure they can access their savings in an emergency – here's your ready-made answer.

- Best Isa rates tables

- Simple tax rules

Once your money is in a cash Isa, you will not have to talk to the taxman again. It won't be taxed as it grows and the income you take is totally tax-free.

- The 'wrapper' effect

Easy access: Isas are the winners in a cash emergency

Stocks and shares Isas act as tax 'wrappers'. As well as tax-free growth, you do not have to pay Capital Gains Tax (CGT). The only tax payable is dividend tax at 10%, which applies for both basic and higher rate taxpayers. Outside Isas, higher rate taxpayers pay 32.5%. And if you use a fund supermarket as your Isa 'wrapper', costs are significantly cheaper than with a pension.

- Read more: How fund supermarkets cut costs

- Means-testing in retirement

Used as a source of income, Isas have certain benefits for retirees. 'The Isa really comes into it's own at the time the person decides to stop working and start drawing an income from the fund,' says Lorreine Kennedy.

Danny Cox explains: 'Tax free income from Isa has no impact on age related allowances for the over 65s, no impact on personal allowances for those with income over £100,000 and there is no requirement to record on a tax return.'

- Lasting simplicity

You put your money in, you take your money out - it's very, very simple.

Isa cons

- No tax relief on contributions

There's no tax-back incentive as described for pensions above. So any growth isn't as powerful. 'On paper a pension will always produce a bigger fund for the same contribution because of the tax relief,' explains Danny Cox.

- Saving limits

You can only pay a maximum of £10,200 into Isas each year. You can invest all of it into a stocks and shares Isa, or save up to £5,100 into a cash Isa. These limits might well be sufficient for most people. Think about it, over the course of a 40-year working career, you can put away £400,000. But what about those wanting to save more or who start late? Perhaps you can only afford to start saving for retirement when you reach your 40s - the limit here is serious restriction.

David Thurlow says: 'One of the biggest drawbacks with an Isa is the contribution levels. A maximum of £10,200 can be paid into an Isa each year, whereas for most people allowable contributions to pensions are much higher'.

- No employer contributions

David Thurlow of Atkinson Bolton says: 'Employers can't pay into ISAs but can pay into pensions. So if your employer will pay into your pension, it is nearly always best to receive this.'

- Means-testing while young

While you are still working, an Isa will affect most means tested benefits, such as income support, whereas a pension pot pre-retirement will not.

TEN TOP CASH ISA TIPS

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Isa transfersHow to transfer & complain

Top IsasWhat should you go for?

Isa transfersTop Isas for transfers

Santander IsaGet 3.5% from Santander

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Magnificent SevenSeven best cash Isas

• THE VERDICT

- Danny Cox (Hargreaves Lansdown)

'Isas provide an ideal way to grow tax-free cash savings as well as building capital by investing in the stock market. Isas are a better choice if access to savings is needed before age 55 or if 100% of the capital is required at once.

'In reality, most people should spread their savings between Isa and pension, so they have funds which they can access if they need to, whilst at the same time taking advantage of the tax benefits of pension for retirement savings.

- Find an independent adviser near you

- David Thurlow (Atkinson Bolton)

'In my view, many basic rate taxpayers should maximise their Isas before paying into pensions. The flexibility of the ISA gives it a clear edge, especially as with the pension they will get basic rate tax relief up font but end up paying basic rate tax on most of the income. For higher rate taxpayers, especially those that are likely to be basic rate taxpayers in retirement, the pension has the advantage, if you are comfortable with the inflexibility and the risk of government meddling with the rules. Where employers are paying into the pension scheme, this opportunity should be maximised.'

- Jason Witcombe (Evolve Financial Planning)

'For basic rate taxpayers my view is that Isas are generally better. With the exception of contributions made via an employer scheme, why would you tie money up in a pension for 20% tax relief when the odds are you will pay at least 20% tax in retirement?'

'However, higher rate taxpayers should focus more on pensions. Take an extreme example. Someone with an income of £110,000 is paying an effective rate of income tax of 60% on the top £10,000 of their income due to the loss of Personal Allowance. Paying money into a pension gets round this. Given the choice, most people would take £10,000 in their pension versus £4,000 of post tax income that they could put into an ISA.'

- Peter McGahan (Worldwide Financial Planning)

'It depends on the need for the investor. Personally, however, if I had an option for an immediate uplift of 66% with a pension [the effect for a higher rate taxpayer], I would value that higher than the accessibility of an Isa.

- Lorreine Kennedy (Care Matters)

'Anyone planning for their retirement should consider both pensions and Isas. It depends on how much you can afford to save. If you are considering contributing a modest sum of £20 per month, then perhaps a cash Isa on its own may be most appropriate route. Anyone able to save more than the annual Isa allowance should generally consider investing the excess into a pension.'

What do you think? Have the experts got it right or is there more to it? Share your views in the reader comments below...

Read more: Pension

Pension hope for babyboomer generation

The top rates on annuities – the product retirees buy to turn a pension pot into an income – held steady last month, temporarily halting their downward spiral.

It points towards potential breathing space for a generation of 'babyboomers' approaching retirement.

A raft of scare stories over the summer suggested that millions of over 50s are on a 'collision course with an impoverished retirement'. Almost eight in ten are set to receive an annual income of just £8,000, it was predicted.

And after decades of annuity rates drifting unabatedly downwards, even a £100,000 pension pot now only equates to an income of £5,630 a year for a couple.

With the help of annuities expert, Billy Burrows at Burrows & Cummins, we take a look at what's going on.

What are annuities?

Annuities are like insurance in reverse – you pay a lump sum (your pension pot) and get monthly payments in return, guaranteed for the rest of your life.

When you hand over your life savings, an insurance company invests your pot into 'safe' assets. More often than not, these will be government bonds, known as 'gilts'.

This means the rates offered to newly retiring pensioners are largely dependent on the return – or yield – gilts are providing at the time.

What is this 'hope' for rates?

Encouragingly for those preparing to buy an annuity, the gilts yields firmed this month.

This has been helped, in part, by confidence in the stock market, with the FTSE 100 rising by 100 points since late September. With markets climbing, investors have sold 'safe' gilts, and bought more volatile shares. This pushes the price of gilts down but the yield - which is like the interest rate on any other bond - up.

The news that the UK economy grew by 0.8% in the last quarter is a good example of how this works. The positive news saw investors sell gilts, spiking the yields to a new one-month high.

Billy Burrows, an annuity expert with Burrows & Cummins, says the trend has brightened the outlook for over 60s looking into annuity purchases.

He says: 'This year it seems that yields are increasing so perhaps there is a chance that rates will increase, albeit by a small margin. But I don't think it is sensible deferring an annuity purchase in hope for higher rates because any gains will be modest.'

Why are rates so low?

For nearly twenty years now, annuity rates have been in seemingly terminal decline. Back in 1991, a £100,000 pot could have secured an standard annuity income of over £15,000 a year. In June, the level fell below £6,000. Check out the graph below for a snapshot.

Billy Burrows' benchmark measure of annuity rates shows that the average has declined by significantly over the last twelve months.

Billy Burrows: Expert annuity advice

A year ago, if a man 65 with a £100,000 pension pot and purchased a joint life annuity for him and his wife, aged 60, he would receive around £6,000 per annum. Today that same annuity pays just £5,630 - a fall of 6% over the past twelve months.

That wasn't helped by sudden cuts in bond yields in August, which sent rates plummeting by about 1% on average.

Yet, according to Burrows, things have stabilised because Canada Life – one of the biggest players in the annuity market – has held its rates firm since July.

In his regular annuity rates round-up for This is Money, Burrows wrote: 'Recently, bond yields have risen and Aviva increased rates, but then (18 October) Canada Life cuts its rates. Annuities are like a see-saw - one minute up, the next minute down.

One of the factors leading to Canada's cut will have been the need to reduce the level of new sales as it was top of the best tables for September and first half of October. Burrows says a lack of competition is also a major downward force on rates.

He says: 'For standard annuities there are only three competitive companies; Aviva, Canada Life and L&G and the lack of competition removes some of the incentive to increase rates.'

What can you do?

Be aware that there are many types of annuity. Standard annuities pay a set income that doesn't change for the rest of your life; inflation-linked annuities rise with prices of goods; and investment-linked annuities that depend on stock market performance.

Also be aware that annuity providers vary greatly in the rates they offer. You have the right to shop around for the best.

Add to that, huge swathes of pensioners don't realise they could get an annuity boost if they have health problems. Even smoking or minor blood pressure troubles qualifies you for an 'enhanced annuity', with the difference between standard and enhanced rates as much as 24%, according to annuity specialists MGM Advantage.

Craig Fazzini-Jones, of MGM, says: 'The gulf between the best and worst annuity rates for conventional and enhanced products is becoming wider, and with rates in general falling it's more important than ever to consider alternative retirement income solutions that can really make the most of people's retirement savings.

Billy Burrows says significant rises in annuity rates are extremely unlikely. His tip is to look into locking part of your pension pot into an investment-linked annuity to boost returns, while leaving the majority in a safer lifetime income product.

›› More: Latest annuity rate news and predictions:

'The logic is that if an annuity is a long-term product, it should be backed by a suitable long-term investment,' he says.

'There are basically three types of investment linked annuities; MGM's Flexible Investment Linked Annuity, Prudential's income Choice and Sun Life Financial's i2live annuity. They all provide an income for life where future payments will rise or fall depending on future returns. They have a level of guaranteed income to protect investors from a stock market crash and they allow the flexibility to change the amount of income payments or buy a different type of annuity in the future.'

- Read Billy Burrows' free guide to investment-linked annuities for more information.

Read more: Pension

Official state pension ages revealed at last

In October's Spending Review, Chancellor George Osborne announced that the state pension age would rise to 66 for all Britons by 2020.

However, the Government gave only scant indication of a timetable for the gradual increases, leaving millions of Britons born between April 1953 and April 1954 in limbo and other over 50s confused.

When This is Money asked for further details, we were told that calculations were 'onging' – an astonishing insight into the failed bureaucracy of an administration happy to announce policies without ironing out the details first.

With hundreds of our readers writing in to ask confirmation of their new retirement date, This is Money took it upon itself to crunch the numbers and produce a 'rough estimate' for the new timetable.

We are pleased to report that we weren't far wrong – a month or two out here and there. But, thankfully, we can now confirm the 'official' retirement dates below.

They show that almost half a million women will have to work for up to two extra years before qualifying for their state pension.

Meanwhile, about 4.5m men and women will be forced to work for up to a year longer than previously expected. Five million people stand to lose up to £14,000 each as a result.

›› How to make up your lost state pension

Changes for women

Changes for both women AND men

These proposed changes to the timetable are not yet law and still require the approval of Parliament.

As we reported in October, the existing timetable for the women's pension age to rise will stay in place until 2016.

The last woman to retire at 60 has already done so. Women born between 1950 and 1953 will see their retirement age gradually rise to 63 between now and 2016.

Here is the existing timetable that remains in place for women:

Read more: Pension

Millions to lose Ј41K in two-tier pensions

Some of these pensioners will have retired as little as a day before the planned introduction of a new flat-rate basic state pension, which promises to pay £140 to everyone.

Almost one million workers are due to retire in the two years before the proposed changes are introduced in 2015.

Knowing they will be £41,600 worse off over 20 years than those who retire later, many could be forced to rethink their plans and postpone their retirement.

'This would be a disaster,' says Neil Duncan Jordan, from the National Pensioners Convention charity.

'It would create a new form of pensions apartheid, whereby those reaching state pension age before the changes are introduced will receive a fraction of the pension enjoyed by those retiring after.'

Earlier this week, the Daily Mail revealed that pensions minister Steve Webb wants Britain to have a flat rate £140 basic state pension. This would replace the current payout of £97.65 for single people and the complex system of benefits and credits for poorer pensioners.

The British state pension is one of the lowest in Europe. An estimated five million women pensioners are not even able to claim the full amount.

Even if the state pension rises with inflation, the difference between the old and new pension will be £40 a week. That amounts to £2,080 a year more for those with the new state pension - a total of £41,600 over the 20 years most pensioners will live for after retiring.

For couples, the difference could be even worse. They get £156.15 under the current system: but under the new regime they would get £280 between them - £123.85 a week more. If they were to both live until they were 85, this would mean they were £128,804 better off than those stuck in the old system.

Existing single pensioners would need to have saved £54,000 into a private pension to get a weekly payout of £140, according to the insurer Standard Life. Experts suggest that many of the one million workers set to hit state pension age in the two years before 2015 may consider postponing retirement in order to claim the higher handout.

Sheila Grant, 65, is one of the millions of women forced to rely on her husband for pension income.

Mrs Grant (pictured with her husband, Graham, at their home in ascot, Berkshire) cared for their two daughters and paid the married women's stamp when she returned to work.

This means she now receives a state pension of just £60 per week instead of the full amount at £97.65.

She says: 'It is really unfair that women like me should have to rely on their husband's pension provision just because they took time off work to care for children. Hopefully, the new rules will give women a bit more independence and not penalise carers in the same way.'

Unfortunately, Graham also bought a single-life annuity, which means their income from his private pension will stop entirely when he dies.

'I only have a tiny private pension, so I know my income will be drastically reduced if Graham dies first and that is a big worry,' she says.

They also fear the Government could put in place draconian measures to ensure savers can't do this. More than 1.2 million people have put off drawing their state pension. In return, they will get a higher state pension when they retire.

'I'm sure the Government will clamp down on those who delay their retirement to avoid the new rules,' says John Lawson, head of pensions policy at Standard Life.

Experts also fear another raid on Middle England to pay for the changes, with generous earningsrelated state pension top-ups, which push certain people over the £140 threshold, clawed back.

'we could well see many savers losing some of their entitlement to state pension top-ups, which would, effectively, be a form of tax,' says John Ralfe, an independent pensions consultant.

Ministers claim savings made from cutting means testing and increasing the state pension age will pay for the pension increases. pension credit, for example, costs £54 per person per year to administer, compared with just £5.40 for the basic state pension.

The full details of the reforms have yet to be unveiled, but the Government will still require savers to build up the minimum number of NI contributions to qualify for the full £140 a week.

'This could mean large numbers of women with several part-time jobs who don't pay NI could miss out,' says Dr Ros Altmann, director general of Saga.

A Department for Work and Pensions spokesperson says: 'Our aim will be a simple, decent state pension for future pensioners which is easy to understand, efficient to deliver and affordable.'

Read more: Pension

How to plan for a richer retirement

Fancy surviving ice-cold winters without heating? Or rummaging through value ranges at the supermarket for cheap reconstituted meat every week? Didn't think so.

Unfortunately, that's the prospect for millions of Britons who reach retirement and have to make do on the measly £97.75 a week state Pension, having failed to plan effectively.

The stark reality is that putting something aside for old age has become an unavoidable necessity these days.

As life expectancy rises, many of us can expect 45 years in employment followed by 30 years of retirement, possibly living on until we're in our nineties.

So, how can you make sure you're not left out of pocket for three whole decades? Simple answer: plan effectively.

How, exactly, to do this is a tricky question. After all, it varies greatly depending on how far you've journeyed through life.

So to make things a little simpler, we've put together this easy-to-follow guide on making sure your golden years are rich and fulfilling.

We've recruited the help of two highly-regarded pensions experts, to keep you on track.

One is Mike Morrison, a man with a treasure trove of experience in the pensions industry and currently head of pensions development at Axa Wealth. The other is Martin Bamford, the managing director of award-winning IFA, Informed Choice.

Follow our decade-by-decade guide below...

›› IN YOUR 20s

Key points:

• Focus on clearing your debts
• But make sure you open an Isa.
• Then save what you afford.

In your twenties you probably have your first proper job with a proper salary. But retirement will seem a long way in the future. At this stage, it's reasonable to allow other financial objectives to take priority.

According to Mike Morrison, those in their 20s should first look into repaying any student debt, especially more expensive bank and credit card debt, cover all living costs, and then see if there's enough left to squirrel some away.

- How to pick the best Isa

Martin Bamford says that saving something, however small, is better than nothing: 'Starting a Pension this early is a great way to build up a bigger retirement fund for later in life, as you add more contributions over your lifetime and they have longer to grow. Even if you can only afford a small amount, this is about forming a healthy savings habit.'

One of the best places for younger adults to put savings is a tax-free Isa.

'It might be better practice to save using an Isa where you are still building financial resources for the future but have greater flexibility in terms of access to the money,' says Bamford.

At this stage, a Pension is by no means a necessity.

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›› IN YOUR 30s

Key points:

• Reassess your debts and outgoings
• Join your company Pension scheme as soon as possible
• Think long-term with your investments.

So you're in your 30s. This can be a busy decade from a financial perspective. All of us face new challenges, with the costs to go with them. You may be getting married, starting a family or buying your first house. Or a combination of the three.

First things first, then: re-establish what debt you have and find ways to address it. Once you've done this, says Mike Morrison, you should ask yourself a set of questions: 1. Do you now have your own family to consider? 2. Do you have sufficient 'rainy day' savings? 3. Have you bought / are you looking into buying a house?

Marriage? Young couples in their 30s are faced with myriad financial concerns

This should help you establish a overview of your key financial outgoings. There is a fine balance to be struck between saving for the future and paying off debt, particularly expensive unsecured debt such as credit cards and personal loans.

Once this is done, there's no time to waste. Explore your retirement saving options as soon as you can. Your first point of call should be to find out if your company offers a Pension scheme. If so, they'll make contributions on your behalf. This is effectively a pay rise – if you don't take it, you're turning down free money.

Martin Bamford says: 'Make sure you are a member of your company Pension scheme if one is offered and take an interest in how this money is being invested. Too many Pension scheme members select the default investment option rather than something tailored to your own financial objectives'

Take a long term view on your Pension investments. You can afford to take on more risk – in the form of shares - as there is a high chance this will pay off in 30 years' time. The old adage, 'shares outperform savings accounts in the long run', still rings true.

But remember, adds Bamford, that retirement planning is about more than just building a big Pension fund - make sure your budget is under control and clear debts where possible.

›› IN YOUR 40s

Key points:

• If you haven't started saving, do something about it!
• Keep building your Isa
• Your earnings should be peaking - dedicate some to a Pension

Ideally, by the time you reach your 40s you'll already have built up some retirement savings, whether in the form of Isas or a company or personal scheme.

But if you haven't already started, it's not too late. It will just require more effort. This is a very crucial time for your retirement planning, and it's imperative that you act now. Your earnings are likely to be approaching their highest during this decade, and you should now be on top of your debts. All in all, you should be in a good position to start dedicating some real money towards planning for the future.

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'Make the most of pay rises and bonuses to boost your retirement savings, rather than simply increasing your expenditure each time,' says Martin Bamford. 'This is the time to take your retirement planning seriously, and that means having a target retirement age and understanding what your lifestyle will look like in retirement. You might not be able to paint an accurate picture of your retirement just yet, but you should be thinking about it in broad terms and making sure your financial plans are on track to deliver.'

The least you should have is an Isa, says Mike Morrison. Keep contributing to this over the years and try to build up your tax-free savings. Crucially you'll need to start planning the sort of income you expect to receive in retirement. If you plan to pack it all in early, then factor this into your thinking and make sure you increase your savings contributions.

›› IN YOUR 50s

Key points:

• Maximise your contributions
• Remove risk from your Pension investment plan
• Consider using a Sipp for greater control

Right, it's time to get serious. This decade is perhaps the most important of all when it comes to retirement planning.

Big 50: When you hit the half century, it's time to get serious about your Pension

Firstly, do you have a retirement date in mind? It might not be definitive, but it should serve as a guide. Then calculate the sort of income you want. 'Perhaps work out a minimum and a 'nice to have',' says Mike Morrison.

Next, take a detailed look at your Pension and where it's invested. You'll need to be positioning your Pension fund for your choice of retirement income option.

'If you are likely to purchase an annuity when you retire, you should be phasing out volatility from your Pension fund so there is less risk of a big dip in value a short time before you take benefits,' says Bamford. Take money out of risky equities and put it into safer cash investments. There could be nothing worse at this time than seeing a stock market lurch take a chunk out of your pot just as you're about to dig in.

Hopefully, you'll have accumulated a sizeable Pension fund by this age. If this is the case for you, consider using a Self Invested Personal Pension (Sipp) to exercise greater control over the way in which it is invested.

- How to find the cheapest Sipp

Consider maximising your contributions, too. Particularly if you are a higher rate taxpayer (remember that pensions can be tax-efficient). You may have grown up children you wish to support financially, but try to strike the balance. As much as you can should go towards your pot - you won't have many other chances to maximise the size. If, and when you purchase an annuity, this can make a serious difference to your annual income.

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›› IN YOUR 60s

Key points:

• Check that all your debts, including mortgage, are in order
• Decide on whether you'll buy an annuity immediately or take drawdown
• Talk to an IFA before you take any action.

You're almost there. During this decade you will be making important decisions about how your Pension fund produces cash and income in retirement.

'These are often lasting decisions that can have a major impact on your finances in later life, so it is the time to seek expert independent financial advice,' says Bamford.

This is particularly true in the case of annuities, where the options are varied. Essentially annuities are like insurance in reverse - you hand over a large lump sum (your Pension pot) to an annuity provider, and they give you regular monthly payments in return for the rest of your life.

You may qualify for a higher annuity rate if you are a smoker or have an illness. This is called an enhanced annuity.

- Deals: Find the best annuity rates

- Forecast: What next for annuity rates?

Relax: If you've planned carefully, your retirement truly can be your golden years

Martin Bamford says: 'Making choices at retirement is about so much more than simply choosing the most competitive annuity rate. It is becoming increasingly popular to use an Unsecured Pension to have greater control over income flexibility in retirement, often phasing the payment of tax-free cash over several years to reduce income tax bills. This is a more complicated strategy than buying an annuity but can really pay off over the longer term.'

Mike Morrison says that it's important to make sure all your debts are in order. Hopefully you will have been able, or are close, to paying off your mortgage, but what about children on your payroll? Are you still supporting them and their young families? These are important issues to discuss with an IFA before you sign up to an annuity.

Additionally, you may be fit and able and want to keep working. This is now possible because the government is set to prohibit employers from forcing their staff to retire at 65. It may be beneficial to keep working for a period and top up your pensions as much as you can.

'Don't forget,' says Morrison, 'pensions contributions get tax relief, so any immediate contribution gets an uplift from the taxman.'

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Last updated in October 2010 by Dan Hyde

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Read more: Pension

Late in Life, an Agonizing Choice Over Surgery

Late in Life, an Agonizing Choice Over Surgery

The New York Times, November 15th, 2010

Editor's Note:  This one's got nothing to do with retirement finance, but is, in the opinion of this editor, an important story to read for anyone considering a medical procedure with major quality-of-life implications at advanced age.  We make no suggestions or recommendations, as these decisions are and must be intensely personal.

Forgoing a potentially life-saving medical procedure may be easier at age 94 than age 54, but for my patient George Pollack it was a wrenching decision anyway. Suffering from a severe foot ulcer that would not heal, he was told his only chance of a cure was a partial amputation of his leg. Even then, there were no guarantees.

George was a savvy medical customer. He had been a lawyer in New York for more than 60 years — among other things, serving as executor for the estate of Lou Gehrig’s widow, Eleanor, and making sure that any payments from the use of Gehrig’s image went toward A.L.S. research at Columbia University Medical Center. I originally met George when I was doing research on Lou Gehrig’s illness.

George was suffering from peripheral vascular disease, or obstruction of the arteries that feed the limbs. Early on, it is possible to reopen clogged blood vessels with a balloon. But when the disease worsens, blood-starved areas, usually the feet, may develop life-threatening ulcers.

By the time I met George, in 2002, he was already prone to ulcers — a result of flat feet and decades of poor circulation — and he required a complex combination of antibiotics, ointments and dressings. I gave what advice I could, referring him to an infectious-disease specialist who helped cure one of the largest ulcers.

By April 2009, things were worse. George had a large ulcer that would not heal on his left foot and was requiring hospitalizations and intravenous antibiotics. One surgeon strongly advised a below-the-knee amputation of the left leg.

George got a second opinion from Dr. Alan I. Benvenisty, a surgeon and director of the vascular laboratory at St. Luke’s Hospital. In August, hoping to try a balloon procedure, Dr. Benvenisty sent him for an angiogram, a dye study that generates images of the arteries. But the test showed that a balloon was out of the question. Amputation was the only surgical option.

So Dr. Benvenisty did what any doctor should: he laid out the options, pro and con. He told George that surgery was very risky and that the wounds did not heal properly in roughly 30 percent of below-the-knee amputations. A study of 704 such operations, published in The Archives of Surgery in 2004, found that patients were at risk for “significant morbidity and mortality.” In George’s case the odds were even longer: he was 94 and had suffered a mild heart attack during his angiogram.

And then there was rehabilitation. At the very least, George would require two taxing months of aggressive physical therapy in a nursing facility.

What was the other option? Without surgery, Dr. Benvenisty told George, the vascular disease would probably kill him in a matter of months.

I was among the many people to whom George spoke. Part of him clearly wanted to try surgery. After all, he told me, who does not want to live?

Read more of this article.

Read more: Pension

Work pension schemes should not fail us

We become used to insurance companies ripping us off when it comes to pensions.

It's a bit harder to take when it's your own employer or, more precisely, the trustees running their pension fund.

It now transpires that many schemes have been failing to provide their members with clear and sensible advice on annuity purchases.

Instead, those coming up to retirement had been buried in gobbledygook and industry jargon.

The result is far too many have bought the wrong annuity. In some cases, there will be nothing for their spouse when they die.

Others have been left with a far smaller income in retirement than they might otherwise have received.

The pensions regulator is now taking action against some of those it investigated.

It is to the benefit of pension scheme members everywhere that the regulator is in this instance on the ball.

Read all of Tony's Money Mail column

• Pity the parents of indebted students
• Work pensions cheat us with jargon
• Fundsmith should reveal its share picks

Read more: Pension

State workers willpay more for pensions

The Chancellor gave no indication of how much extra it will be, but vowed to protect lower earners and shift the burden on to fat cat bosses.

As part of the reforms, MPs will no longer be entitled to their lucrative – and costly – final salary pensions.

But Mr Osborne revealed that he is keen to maintain a general link to between wages and public sector pensions, which means workers will still be guaranteed a percentage of their salary in retirement.

Such reforms are urgently needed to necessary reduce the burden on the taxpayer, Osborne said.

Because public pensions are 'unfunded', the taxpayer meets the cost in full every year. This annual bill is set to rise to £33bn in 2016.

'We accept that there has to be an increase in employee contributions,' Mr Osborne said.

But he added that any changes should be 'staggered and progressive', so that those on low incomes were protected and the 'highest paid will pay largest contribution'.

Full details had not been finalised in time for the Government's Spending Review today. Mr Osborne said he will base the changes on a final report from Lord Hutton's on-going enquiry into the cost of public pensions.

M. Osborne said: 'Lord Hutton's findings form basis of new deal so that taxpayers don't pay unfairly,' he said. 'We will await full report before drawing any conclusions.'

Dr Ros Altmann, a former adviser to No.10 said the announcements were a 'clear signal' that age of the final salary public sector pension is coming to an end.

She thinks Obsorne will push the system towards a 'career average' model, where pensions are based on a percentage of an employee's average lifetime wage (as opposed to their salary at retirement).

Two weeks ago, the Independent Public Service Pensions Commission, set up by George Osborne and chaired by former Labour Minister Lord Hutton, issued an interim update on its inquiry.

It gave the green light for the Government to push ahead with reforms that could translate into a pay cut of up to 3% for the average public sector worker. It provoked outrage from the unions.

In the longer term, public sector workers may have to accept sweeping reforms of their pensions, likely to include retiring later, a slower build-up of benefits and a move away from final salary schemes.

Read more: Pension

Why women are unprepared for retirement

Other women' s husbands call them by endearing pet names. Mine refers to me as 'the walking pension plan'.

He's joking - I think - about his fond imaginings that, since I'm a lot younger than him and a financial writer to boot, I'll be maintaining him in style in his dotage. Well, he can hope.

But I suppose I only have myself to blame, because thanks to a combination of my job and my ingrained northern thrift, I am a fully-fledged pensionista.

Not only do I contribute as much as I can to my own pension fund but, given half an opening, I'll try to convert other women to the joys of retirement planning, too.

Mock my pension fetish if you must - and plenty of my friends do - but now I'm in my 40s I see it as a key part of my age-proofing regime, along with the moisturiser and the Pilates. It's a three-pronged strategy: face, figure and finances.

But there are a whole raft of reasons why women are at greater risk than men of financial hardship in their later years.

The big pension killers for women are unequal pay, taking career breaks to care for children, bereavement and divorce.

Tough economic times, and the threat to many families of losing their child benefit, are likely to widen the pensions gender gap still further, as women are less likely to save and more likely to use their Money to make sure their families don't go short.

Dr Ros Altmann, director-general of Saga and a former adviser to No 10, says: 'Women are still very much second-class citizens when it comes to pensions - and what is worse is that it's barely even acknowledged.'

Much of the problem stems from the fact that the foundations of our current pensions system were laid in the postwar period and do not reflect the realities of modern women's lives, juggling work and home.

Recent developments have not helped. Fewer female workers have access to a top-quality final-salary pension scheme at work than men.

Just over a third of women are members of a final salary plan, compared with more than 40% of male employees, and many firms are closing these funds because they have become too expensive to run.

The Government's plans to scale back public sector pensions may be necessary, but they will also have a big impact on women, who make up more than 60% of the membership.

Typically, most women still earn less than their male counterparts, so can't save as much and, as we tend to live longer, we have more years to fund in retirement.

The result is that fewer than half of British women are saving enough for an adequate pension, says research by Scottish Widows. A quarter save nothing.

Ros Altmann: 'Women ares second-class citizens when it comes to pensions'

No surprise then that, according to the Office for National Statistics, the average annual income for a lone female pensioner is just over £13,700 a year, and that single, divorced and widowed women make up a high proportion of the 1.8m retired households living below the poverty line.

No one likes to think it will happen to them, but experts warn even comfortably-off middle-class women could struggle to maintain their standard of living.

'It is easy to be lulled into a false sense of security,' says Professor Karen Pine, of the University of Hertfordshire, the co-author of Sheconomics, a book aimed at helping women gain financial control.

'Many women find that a middle-class lifestyle is much harder to keep up, especially if they have given little or no thought to a pension in their own right.'

But the practical barriers facing women are only one part of the problem. Experts warn there are also psychological forces at play. For while men think of pensions and investments purely in financial terms, for women Money is inextricably linked with emotions and relationships.

There are three distinct female mindsets that can sabotage women's pension planning as they pass through the phases of their life: Cinderella Singletons; Money Martyrs and Trusting Traditionalists.

Young single women can morph into modern-day Cinderellas, where they struggle to pay off student debt, and getting on to the housing ladder seems overwhelming.

Instead, they opt out of financial planning, in the hope that their prince will arrive and bail them out.

And, as Amanda Mackenzie, a senior executive at insurance group Aviva, points out, these young women are missing a valuable opportunity to make tax-efficient savings before they take time out to have children.

'There's never an easy time to start paying into a pension for women, as once the student loan gets paid off, there's the deposit on a home to think about and then children. But it is important to make it a priority to save.'

Motherhood often lures women into the trap of Money Martrydom, where they put everyone else's needs ahead of their own.

Research by Scottish Widows shows that family life triggers a 'selfless gene' in women, that prompts them to spend on others, even if it compromises their own long-term financial well-being.

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Mothers are not the only martyrs. Morris says single women who give up work to look after elderly parents can also end up sacrificing their financial future. 'It is great that women take on a caring role, but the price can be high,' she adds.

But, she argues, Money Martyrs could end up being a burden on their children when they are older.

'Adult children may have to help support you financially if you haven't got a decent pension of your own, and they might not be so grateful for the sacrifices you made,' Morris says.

Politicians have belatedly made improvements to the basic state pension system to reflect the fact that many women take time out of the workplace.

For women retiring on or after April 6, 2010, the number of qualifying years needed for a full basic state pension has been reduced from 39 years to 30.

It is a welcome change, but to put it in perspective the basic state pension is currently £97.65 a week, and women who do not notch up those 30 years of NI contributions will receive a fraction of this.

Plus women will have to wait longer to receive it in future, as the female state retirement age is being raised progressively over the next ten years from 60 to 65.

There are longer term plans to raise the retirement age for both sexes to 68. New low-cost pension accounts aiming to help women and lower paid workers to save are being phased in from 2012.

By 2017, all employers will have to automatically enrol staff earning above a certain threshold into a pension scheme. Employers will also have to contribute at least 3% of income towards it.

Guide: How to plan ahead and ensure a richer retirement

But financial advisers say these will still exclude large numbers of women. Tom McPhail, of financial adviser Hargreaves Lansdown, says: 'Women working part-time, or doing a few jobs each paying below the threshold, could miss out.

'It will be an improvement, but there would still be millions of women left without a pension plan.'

Another improvement in recent years is a concession allowing the partners of non-working wives to put up to £3,600 a year into a tax-efficient pension plan on their behalf, but this is not well known.

Which leads us to another vulnerable group - the Trusting Traditionalists; women dependent on their husbands to provide for them in retirement and who have left it too late to build up savings of their own.

As the Prudential's pension guru Vince Smith-Hughes says: 'Relying on someone else's pension is risky.'

The Trusting Traditionalists may believe they are happily married, but divorce in later life can have a devastating financial impact.

As well as this, thousands of widows are being stripped of their financial security because, unbeknown to them, their husband has signed up for 'single-life annuities', a pension which stops payment on the death of the holder.

Says Altmann: 'Women are being left absolutely destitute. Many of these men are loving husbands who would be horrified if they had known, but they don't understand the risks.'

Altmann rightly describes it as a scandal, but it is just part of a much bigger one - that millions of women in this country who work hard all their lives inside and outside of the home are missing out on a decent retirement.

That is why I am not apologetic about being obsessed with my own pension. They should be a much higher priority for politicians and the financial industry.

And I'd love to see magazine editors featuring more finance articles alongside the fashion and beauty, helping readers become women of style and substance.

As Professor Pine says: 'We buy all these age defying-serums, but you can't defy the fact that women need a pension. There's no cream for that.'

Read more: Pension

Official state pension ages revealed at last

In October's Spending Review, Chancellor George Osborne announced that the state pension age would rise to 66 for all Britons by 2020.

However, the Government gave only scant indication of a timetable for the gradual increases, leaving millions of Britons born between April 1953 and April 1954 in limbo and other over 50s confused.

When This is Money asked for further details, we were told that calculations were 'onging' – an astonishing insight into the failed bureaucracy of an administration happy to announce policies without ironing out the details first.

With hundreds of our readers writing in to ask confirmation of their new retirement date, This is Money took it upon itself to crunch the numbers and produce a 'rough estimate' for the new timetable.

We are pleased to report that we weren't far wrong – a month or two out here and there. But, thankfully, we can now confirm the 'official' retirement dates below.

They show that almost half a million women will have to work for up to two extra years before qualifying for their state pension.

Meanwhile, about 4.5m men and women will be forced to work for up to a year longer than previously expected. Five million people stand to lose up to £14,000 each as a result.

›› How to make up your lost state pension

Changes for women

Changes for both women AND men

These proposed changes to the timetable are not yet law and still require the approval of Parliament.

As we reported in October, the existing timetable for the women's pension age to rise will stay in place until 2016.

The last woman to retire at 60 has already done so. Women born between 1950 and 1953 will see their retirement age gradually rise to 63 between now and 2016.

Here is the existing timetable that remains in place for women:

Read more: Pension

Small firms' outcry at national pension

In a drive to make Britain save more, ministers said that all companies will be required to enrol their staff into a retirement fund from 2012.

The coalition was applauded by financial experts for pressing ahead with Labour plans to ensure that an additional 4m to 8m people start to build up savings for their old age.

But there was outrage that small firms were not exempted. Business leaders warned of 'extortionate costs' just as the private sector is being asked to take up the slack while 500,000 public-sector jobs are lost in spending cuts.

There were also claims that up to four out of ten companies which already offer more generous pension schemes will 'level down' their existing provision.

The Federation of Small Businesses said the scheme would prove an 'administrative headache' for firms as they struggle to rebuild themselves following the recession.

It said it was 'extremely disappointed' that the Government was not exempting so-called 'micro firms' - those with five employees or fewer. They would face the major cost of having to hire consultants to set up retirement schemes, since they did not have such expertise themselves.

Labour passed the scheme into law in its Pensions Act 2008, and determined it should come into effect in 2012. Yesterday's announcement by Pensions Minister Steve Webb followed a review by the coalition of whether and how to proceed.

Firms will eventually have to pay a minimum of 3% of wages into a pension pot for all staff aged 22 and over who earn more than £7,475 a year.

It will be phased in between 2012 and 2017, with even the smallest companies, employing just one worker, having to pay in. The self-employed will not be included.

Firms will at first have to pay one per cent of a staff member's salary, rising to three per cent by October 2017. Employees will also be required to contribute - initially at least 1% of their wage, rising to 5% after 2017.

Contributions will initially be based on a maximum salary of £33,540, which will rise with inflation. Bosses will not be obliged to pay greater contributions for higher-earning employees.

Mr Webb said the reforms would 'end decades of decline of membership in workplace pension schemes'.

All firms would have to abide by the new rules, he said, despite speculation that small companies would be exempted.

Employers who fail to make payments into the fund for their workers will face sanctions from the Pensions Regulator, which will have the power to issue fines.

Employees will still have the right to opt out of the pension arrangements, but officials say enrolling people automatically unless they object will mean many more saving for their retirement than at present.

The small print of Government documents revealed that it expects firms to face a £3.2bn a -year extra cost by 2017.

The pension fund is expected to become one of the biggest in the country. Officials forecast that it will be worth between £50bn and £100bn within 30 years, with the cash invested in low-risk shares and bonds.

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The one bit of good news for firms was a 12-week delay before employees qualify, meaning companies can avoid having to pay out for temporary or seasonal workers. Labour had pledged to introduce the new pension rights immediately and for anyone earning just over £5,000, conditions which would have brought an extra million workers into the scheme's remit.

It criticised the Government for increasing the wage threshold at which employees qualify for the scheme, warning that women, who more often work part-time, would be worst affected.

Work and pensions spokesman Rachel Reeves said: 'The Government's own figures show that between half a million and one million women will lose out. It is well known that women and people on low incomes most need to increase their savings for retirement, but today's announcement that the qualifying earnings threshold will increase will make that harder to achieve.'

TUC General Secretary Brendan Barber said: 'The main losers from this increase will be part-time women workers, the least likely group in the workforce to have a pension.'

The Federation of Small Businesses' policy chairman Mike Cherry said: 'While we welcome initiatives to help people save for their future, we are severely disappointed the Government has not listened to the needs of the UK's micro firms and has not made them exempt from automatic enrolment into pensions, which will cost employers in time and money.'

The Institute of Directors said that forcing small firms to enrol staff could backfire. 'While we understand the reasoning behind this, the reality will be that very few employees of micro-businesses will actually be auto-enrolled,' said a spokesman. 'It will place a huge burden on the Pensions Regulator to attempt to police hundreds of thousand of micro-businesses whose employees may well choose not to engage with pensions saving.'

financial advisers, however, welcomed the new government-run pension scheme as an important boost to saving.

Andrew Strange, policy director at the Association of Independent financial Advisers, said: 'Building a more widespread savings culture is absolutely essential to prepare people for their financial future.'

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Why women are unprepared for retirement

Other women' s husbands call them by endearing pet names. Mine refers to me as 'the walking pension plan'.

He's joking - I think - about his fond imaginings that, since I'm a lot younger than him and a financial writer to boot, I'll be maintaining him in style in his dotage. Well, he can hope.

But I suppose I only have myself to blame, because thanks to a combination of my job and my ingrained northern thrift, I am a fully-fledged pensionista.

Not only do I contribute as much as I can to my own pension fund but, given half an opening, I'll try to convert other women to the joys of retirement planning, too.

Mock my pension fetish if you must - and plenty of my friends do - but now I'm in my 40s I see it as a key part of my age-proofing regime, along with the moisturiser and the Pilates. It's a three-pronged strategy: face, figure and finances.

But there are a whole raft of reasons why women are at greater risk than men of financial hardship in their later years.

The big pension killers for women are unequal pay, taking career breaks to care for children, bereavement and divorce.

Tough economic times, and the threat to many families of losing their child benefit, are likely to widen the pensions gender gap still further, as women are less likely to save and more likely to use their Money to make sure their families don't go short.

Dr Ros Altmann, director-general of Saga and a former adviser to No 10, says: 'Women are still very much second-class citizens when it comes to pensions - and what is worse is that it's barely even acknowledged.'

Much of the problem stems from the fact that the foundations of our current pensions system were laid in the postwar period and do not reflect the realities of modern women's lives, juggling work and home.

Recent developments have not helped. Fewer female workers have access to a top-quality final-salary pension scheme at work than men.

Just over a third of women are members of a final salary plan, compared with more than 40% of male employees, and many firms are closing these funds because they have become too expensive to run.

The Government's plans to scale back public sector pensions may be necessary, but they will also have a big impact on women, who make up more than 60% of the membership.

Typically, most women still earn less than their male counterparts, so can't save as much and, as we tend to live longer, we have more years to fund in retirement.

The result is that fewer than half of British women are saving enough for an adequate pension, says research by Scottish Widows. A quarter save nothing.

Ros Altmann: 'Women ares second-class citizens when it comes to pensions'

No surprise then that, according to the Office for National Statistics, the average annual income for a lone female pensioner is just over £13,700 a year, and that single, divorced and widowed women make up a high proportion of the 1.8m retired households living below the poverty line.

No one likes to think it will happen to them, but experts warn even comfortably-off middle-class women could struggle to maintain their standard of living.

'It is easy to be lulled into a false sense of security,' says Professor Karen Pine, of the University of Hertfordshire, the co-author of Sheconomics, a book aimed at helping women gain financial control.

'Many women find that a middle-class lifestyle is much harder to keep up, especially if they have given little or no thought to a pension in their own right.'

But the practical barriers facing women are only one part of the problem. Experts warn there are also psychological forces at play. For while men think of pensions and investments purely in financial terms, for women Money is inextricably linked with emotions and relationships.

There are three distinct female mindsets that can sabotage women's pension planning as they pass through the phases of their life: Cinderella Singletons; Money Martyrs and Trusting Traditionalists.

Young single women can morph into modern-day Cinderellas, where they struggle to pay off student debt, and getting on to the housing ladder seems overwhelming.

Instead, they opt out of financial planning, in the hope that their prince will arrive and bail them out.

And, as Amanda Mackenzie, a senior executive at insurance group Aviva, points out, these young women are missing a valuable opportunity to make tax-efficient savings before they take time out to have children.

'There's never an easy time to start paying into a pension for women, as once the student loan gets paid off, there's the deposit on a home to think about and then children. But it is important to make it a priority to save.'

Motherhood often lures women into the trap of Money Martrydom, where they put everyone else's needs ahead of their own.

Research by Scottish Widows shows that family life triggers a 'selfless gene' in women, that prompts them to spend on others, even if it compromises their own long-term financial well-being.

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Mothers are not the only martyrs. Morris says single women who give up work to look after elderly parents can also end up sacrificing their financial future. 'It is great that women take on a caring role, but the price can be high,' she adds.

But, she argues, Money Martyrs could end up being a burden on their children when they are older.

'Adult children may have to help support you financially if you haven't got a decent pension of your own, and they might not be so grateful for the sacrifices you made,' Morris says.

Politicians have belatedly made improvements to the basic state pension system to reflect the fact that many women take time out of the workplace.

For women retiring on or after April 6, 2010, the number of qualifying years needed for a full basic state pension has been reduced from 39 years to 30.

It is a welcome change, but to put it in perspective the basic state pension is currently £97.65 a week, and women who do not notch up those 30 years of NI contributions will receive a fraction of this.

Plus women will have to wait longer to receive it in future, as the female state retirement age is being raised progressively over the next ten years from 60 to 65.

There are longer term plans to raise the retirement age for both sexes to 68. New low-cost pension accounts aiming to help women and lower paid workers to save are being phased in from 2012.

By 2017, all employers will have to automatically enrol staff earning above a certain threshold into a pension scheme. Employers will also have to contribute at least 3% of income towards it.

Guide: How to plan ahead and ensure a richer retirement

But financial advisers say these will still exclude large numbers of women. Tom McPhail, of financial adviser Hargreaves Lansdown, says: 'Women working part-time, or doing a few jobs each paying below the threshold, could miss out.

'It will be an improvement, but there would still be millions of women left without a pension plan.'

Another improvement in recent years is a concession allowing the partners of non-working wives to put up to £3,600 a year into a tax-efficient pension plan on their behalf, but this is not well known.

Which leads us to another vulnerable group - the Trusting Traditionalists; women dependent on their husbands to provide for them in retirement and who have left it too late to build up savings of their own.

As the Prudential's pension guru Vince Smith-Hughes says: 'Relying on someone else's pension is risky.'

The Trusting Traditionalists may believe they are happily married, but divorce in later life can have a devastating financial impact.

As well as this, thousands of widows are being stripped of their financial security because, unbeknown to them, their husband has signed up for 'single-life annuities', a pension which stops payment on the death of the holder.

Says Altmann: 'Women are being left absolutely destitute. Many of these men are loving husbands who would be horrified if they had known, but they don't understand the risks.'

Altmann rightly describes it as a scandal, but it is just part of a much bigger one - that millions of women in this country who work hard all their lives inside and outside of the home are missing out on a decent retirement.

That is why I am not apologetic about being obsessed with my own pension. They should be a much higher priority for politicians and the financial industry.

And I'd love to see magazine editors featuring more finance articles alongside the fashion and beauty, helping readers become women of style and substance.

As Professor Pine says: 'We buy all these age defying-serums, but you can't defy the fact that women need a pension. There's no cream for that.'

Read more: Pension