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 what 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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With-profits face fire as returns fall

Investors are being advised to transfer out of their with-profits pension funds, as high fees and low equity exposure take their toll on returns.

Some with-profits pension funds are paying out less than they did a year ago in spite of strong stock market returns, according to a survey by money Management magazine to be published next month.

Anyone who has made regular monthly savings into a with-profits fund for the past 15 years will have seen average annual growth of just 3.4 per cent – lower than on 15-year policies a year ago.

While five, 10 and 20-year policies showed slightly higher average growth as of January 1 2011 compared with 12 months ago, their average annual growth is still nearly half that of an average fund tracking the stock market.

Many with-profits funds now have very low exposure to equities, which stunts their growth over the long term.

Providers with higher exposure to equities, such as Prudential, produced stronger performance. Prudential’s with-profits fund was among the best performers over all time periods studied, with annual growth of 6.2 per cent over 20 years for those who made regular savings. This was in spite of the fact that Prudential’s charges for a pension plan opened today are among the highest.

Others performed barely better than cash over the long term. The worst offenders over 20 years – including Scottish Widows and Pearl Assurance – had annual growth rates of less than 4 per cent.

High fees can have a major impact on performance over time. Fund charges over historical periods are difficult to calculate as providers change their fees over the long term. So money Management uses the current fees charged each year and works out the theoretical impact over a period of time, then compares it with how the fund would have grown if no fees had been charged.

For example, over 25 years, someone who paid an initial 10,000 into a fund growing at 7 per cent a year would have 54,274 at the end of that period if no charges had been levied. If they had been in a standard low-charging stakeholder pension, with annual charges of 1 per cent, they would have 42,215 – a 22 per cent hit. But with HSBC Life, they would have just 32,172 – losing 41 per cent in charges.

Prudential, one of the strongest performers in the survey, also has some of the highest fees on pension plans taken out today: 28 per cent over 25 years using the same assumptions.

High fees have a greater impact over longer time periods. Over five years, HSBC Life would have taken just 5 per cent off in fees on the same basis.

“Forty per cent out of a single premium over 25 years is a heck of a lot of money to take out of your fund,” said Janet Walford, editor of money Management. “If the performance collapses, you’re left with high fees, which can have a devastating effect on the outcome.”

In the past, with-profits funds paid out high commissions to financial advisers who recommended the policies because of their supposed ability to “smooth” returns. But with poor performance increasingly common and many funds now closed to new clients, advisers say that investors should consider taking their money out of with-profits altogether.

Danny Cox, head of financial advice at Hargreaves Lansdown, has not recommended a with-profits fund since 2002. “We think the model is pretty much broken,” he said. “You’re paying high fees for worse performance than cash which is a double whammy of poor investment options.”

He says that with-profits funds work even less well for pensions than other types of investments – the funds are also sold as investment bonds – because of the long time horizon for investors, who are usually advised to put their pension into equities.

However, investors who want to transfer out of their with-profits funds should check the terms of their policies, as they could include guarantees for generous final bonuses – which can be up to 60 per cent of the total amount. Investors close to retirement should therefore consider staying in their funds. A with-profits fund’s exposure to fixed interest will also make more sense for investors close to retirement, who are usually advised not to take too much risk with their pension.

70,000 must act to get state pension boost

Those reaching state ­pension age between April 2008 and April 2011, who don't get a full basic state pension, could get more and have it backdated.

The offer allows this group to buy back up to six years of voluntary ­contributions as far back as 1975.

Usually people are allowed to buy back only the previous six years.

The offer will end on April 5 this year. To be ­eligible, you must also have built up at least 20 qualifying years.

The full basic state ­pension is worth £97.65 and will rise to £102.15 from April 6.

To buy a missing year costs £625, but will boost your pension by £169 a year.

For advice, call 0845 604 2931.

Are new NEST pension funds any good?

An estimated £250bn will be managed by these funds in the new national pension scheme by 2050.

But critics have warned so much emphasis has been put on ­cautious investments that investors could be left sorely disappointed.

There are also concerns that two of the five are ­completely untried and untested.

Between October 2012 and 2017, employees who do not have access to a good-quality occupational ­pension will be enrolled automatically into the National ­Employment Savings Trust — or NEST — and have a 4% ­contribution deducted from their ­salary.

In addition, their employer will pay 3% and there will be a 1% top-up from the government to make a total ­contribution worth 8% of their salary.

This money will be put into a ­combination of the five funds, all of which track the value of gilts, bonds, cash or shares.

But eyebrows have been raised that two — UBS Life World Equity Tracker and BlackRock Aquila Life market Advantage fund — are unknown.

The UBS fund aims to track the FTSE All World Developed Index — a selection of blue-chip companies in developed countries. BlackRock will invest in a basket of funds tracking ­anything from bond prices to share prices in companies.

The choice of manager is important because some funds track markets much more accurately than others.

'If I go to a trust or charity and pitch for business, they will expect me to produce a three-year track record,' says Justin Urquhart Stewart, of Seven Investment management.

'I'm amazed they couldn't find a fund that has already been doing this successfully.'

• We've developed a special tool with our sister website MailOnline that will give your pension saving plans a quick healthcheck: PensionTracker

But Mark Fawcett, chief investment officer at NEST, says: 'These two firms have strong track records of running similar funds.'

There has also been criticism that two of the other funds will merely track UK gilt prices. Gilts investors effectively loan the government money. Gilts can be used by those wanting to cushion themselves against stock market falls as they approach retirement.

The funds on offer are State Street UK Index Linked Gilts over 5 Years Index and State Street UK ­Conventional Gilts All Stocks Index.

High hopes: You will be able to allocate your money how you wish between the funds

The former, which already holds £2.4bn of pension money, has returned a healthy 5.85% a year, just pipping the index. Mr Urquhart Stewart says: 'This is a nice little earner for the government. They have a guaranteed ­customer base for gilts, even when they ­represent a poor investment.'

The final fund on offer is BlackRock Aquila Cash. This invests in the money markets and is used as a haven from the stock market. The fund has returned an average of 3.87% a year over the last five years.

Mr Fawcett says more funds will be added, including an ethical fund and a sharia compliant fund.

'There needs to be more choice. Savers could miss out on the rapid expansion in emerging economies,' says Dr Ros ­Altmann, director ­general of Saga.

Everything you need to know about NEST

What is NEST?

It's a new national pension scheme for all employees who do not have access to a good-quality occupational pension. Workers will be moved into it gradually between October next year and 2017.

As part of wider pension reforms, millions more employees will also be enrolled automatically into their company's pension if it offers a quality scheme.

Will it be compulsory?

No, but those aged at least 22 who earn more than £7,475 a year will be enrolled automatically and will have to opt out if they don't want to join.

What will happen to my money in NEST?

At first, money will be put mainly in low-risk funds, such as cash or gilts. money will be moved into riskier investments later with the aim of growing the pension, before being moved into safer ­investments closer to retirement.

Can I choose what happens to my cash?

Yes. You can allocate your money how you wish between the funds on offer. More details will be announced soon.

How much does it cost?

There is a 1.8% initial charge, meaning that for every £100 contribution, £98.20 is invested. NEST says this is temporary and is designed to cover set-up costs. There's also a 0.3% annual management charge, meaning you will lose £3 a year on every £1,000 in the fund.

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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How to avoid 40% tax and boost your pension

Almost 4m people face paying higher-rate tax from April, but some higher earners can avoid the 40 per cent rate altogether by boosting their pension contributions.

The Institute of Fiscal Studies said this week that about 750,000 basic-rate taxpayers are set to pay 40 per cent tax for the first time in 2011/12 as a result of the reduction in the higher-rate threshold from 43,875 to 42,475 that was announced in last summer’s Budget.

This will take the total number of higher-rate taxpayers close to the peak levels of just before the recession, according to Grant Thornton, the accountants. It also means that existing higher-rate taxpayers will pay 40 per cent on more of their earnings.

However, taxpayers who contribute more to their pensions can reduce these bills and even avoid paying any tax at the 40 per cent rate.

“Higher-rate relief is a very attractive upfront tax break for wealthier pension savers – especially as they may pay only up to 20 per cent on their pension in retirement,” says Laith Khalaf, pensions analyst at Hargreaves Lansdown, the financial adviser.

For a higher-rate taxpayer, each 1,000 contributed to a personal pension offers a 250 reduction in their tax bill on top of the same amount of basic-rate relief.

The additional higher-rate relief generally needs to be reclaimed through a tax return, while the basic-rate relief is added automatically to the plan value – boosting a 1,000 contribution to 1,250.

CandidMoney.com, an advisory website, gives the example of a higher-rate taxpayer earning 65,000 with 1,000 of taxable savings interest – whose total income tax liability could be as much as 16,330 this year.

However, by paying 14,800 into a personal pension, as well as contributing to an occupational pension and donating tax-efficiently to charity, the person could reduce the higher-rate tax by 4,500 and boost his or her pension fund by a total of 28,250, including 4,350 of basic-rate relief. The tax savings and relief would total 8,850, the amount of tax otherwise payable at 40 per cent.

Justin Modray of CandidMoney.com says: “This is the nirvana situation, but even getting some way there can yield sizeable benefits.”

Many investors may not have the spare cash to top up their pensions. But if they have non-pension investments they could get the tax relief by switching these into a self-invested personal pension (Sipp).

To reduce tax bills for the current year, contributions must be made by April 5, although cash need not be invested until a later date.

For those earning just over 100,000, paying into a pension can also allow personal allowances to be reclaimed – effectively giving them up to 60 per cent tax relief on contributions.

Although there are tax relief restrictions for some high earners, this affects only those with incomes of more than 130,000 in the current tax year, while from April the contribution allowance for all pension savers is capped at 50,000.

People wanting to calculate how much to contribute to a personal pension to wipe out a higher-rate tax liability need to work out how much income they have above the 40 per cent threshold, then multiply this figure by 0.8. They also need to reduce their higher-rate earnings figure to take account of sums already getting tax relief – contributions to occupational pensions, for example.

In simple terms, investors on an income of 53,875 – 10,000 more than the current 43,875 threshold – could get 40 per cent tax relief on up to 8,000 of contributions, depending on the other reliefs they qualify for. If they contribute more, they simply receive basic-rate relief on the excess.

Making donations under Gift Aid yields the same additional relief as a pension to a 40 per cent taxpayer, while the basic-rate relief goes to the charity.

What next for pensions in 2011?

Sure, 2011 can't possibly be as action-packed as 2010 for pensions, but plenty of loose ends need tying.

And some big reforms await a spot in the limelight.

Most notably, a 'universal' state pension for all Britons is on the cards.

This could provide a single £140-a-week payment for all retired Britons. It would help beat off the confusion caused by means-tested pension credits.

The Treasury has been very quiet since details of the plans were leaked in Autumn 2010, but something momentous is most likely brewing in Whitehall.

Elsewhere, a few of pensions minister Steve Webb's fiddly reforms will need wrapping up.

Public pensions are under the microscope after being accused of being 'unaffordable' by the Government.

A final verdict from the Hutton Report is due before the Budget next March. This will lay out a programme for reform and is likely to be adopted 'in full', the Government has said.

For a taster of what to expect, read our Q&A on what next for public pensions. The main changes will mostly likely be higher contribution levels for employees, a move to calculations based on average pay over an entire career (rather than final salary) and an increased retirement age to match the private sector.

A byproduct to watch out for is union action. Angered firemen, teachers and nurses across the country could strike if their entitlements are downgraded dramatically.

Elsewhere, final salary schemes' yearly tumble towards grizzly death will continue. New EU rules announced in December added another nail to the coffin (how many 'final' nails do we need?). Hundreds of employers may be forced to abandon their schemes if Brussels regulations push up the cost of administering funds by an expected 90%.

Many will be hoping that the Government then decides to stop tinkering with its reforms and let us get on with the very urgent job of saving for retirement. Expect more reports of how little most Britons are stashing away.

Those approaching retirement – the so-called 'babyboomer' generation – could be in for a tough year. That's because annuity rates will come under new pressures.

Although fresh rules will allow some people to opt out, annuities are the products that will convert pension pots into retirement incomes for most people.

At the moment a £100,000 pension pot buys a pension of around £6,000 a year. Rates have drifted steadily downwards over the last 20 years as yields on Government bonds, which back up annuities, have fallen.

In late 2010, bond yields rose. So did annuity rates. But in 2011 an EU-wide ruling will require insurers – providers of annuities – to hold more capital in reserve. Called Solvency II, this could act as a downward pressure on rates.

Follow Billy Burrows' monthly annuity update to find out the prospects for your retirement income.

Watch out for new rules that allow early access to pension pots. A consultation has been launched already. It is something Steve Webb holds close to his heart - he reckons it'll boost pension saving and help stave of a crisis. a

Saga director-general and pensions expert Ros Altmann agrees. She says: 'The pensions 'locked box' is so old-fashioned. It's great for the pensions industry of course, but puts many basic rate taxpayers off the whole idea, so they miss out on their employer's contribution.'