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Arranging a pension plan is often one of the last things we think about when organizing our personal finances, but it is something that we should all have if we want to maintain a reasonable standard of living in the UK during retirement.

Planning for your retirement can be a real minefield. We are constantly being told that we must think about planning for our retirement, but when you are in your twenties, thirties or even forties, who wants to think about getting old? These days, people are living longer than ever before, and an aging population means that we can no longer rely on the government to support us when we grow old. Therefore the level of income we get when we retire is completely in our own hands.

The key is to start saving early. The longer you have to save, the longer you money has to grow in preparation for your old age. Exactly when you start saving is up to you, but bear in mind that the longer you leave it, the more you will have to pay each month when you eventually do start paying to in order to grow your fund sufficiently.

Your retirement fund does not necessarily have to come from a pension. Perhaps you want to invest in property, or want to invest in stocks and shares or pay into a high interest savings scheme like an ISA. Whatever method you choose, remember than any kind of investment does not guarantee you an income. However, if you put your eggs into several different investment baskets, you are minimising the risk of spending your retirement years in poverty.

The word 'pension' has had a considerable amount of bad press over the years, but the bad experiences are fortunately rarer than the papers would have us believe. In reality, pensions are a valid, tax efficient way of saving for retirement.

There are a number of different types of pensions available today but the two main types are 'occupational schemes' for those employed by a company with five or more staff, and 'personal pension plans' for the self-employed or those exempt from an occupational scheme. Occupational schemes can be paid as a 'defined benefit', which means that the retirement fund is calculated using an employer's age, final salary and length of employment, or as a 'money purchase', in which case the amount paid out when the individual retires is only dependent on the size of the fund, regardless of how many years the person in question has actually worked for the company.

© The Pink Fridge Online Magazine 2008 - Pensions