Retirement - don't depend on others!

I am 46 years old and run my own family business. After taking an income from the business, I am left with a healthy profit. I am conscious that I am making no long-term savings for my retirement and up to now have only thought of what state pension I shall receive when I retire. One reason I have not started a retirement savings plan is because my profits can fluctuate quite a lot. I would not want to commit, for example, a fixed amount per month. Should I be content with what state pension I will receive or should I consider saving privately?

The fact that you are at least considering saving for your retirement is very positive. Unfortunately you are in the minority as very few people make a conscious effort to put money aside for their retirement. This is a very worrying trend as the state pension is not adequate for most people, especially if you have not paid the required social security contributions throughout your working life. Do not therefore assume you can rely entirely on the state pension. If you have the financial means to improve this then act now before it is too late.

The earlier you save the larger the fund you can build up come retirement age. If you have not started saving by the time you are 55 or 60 then there is little or no time left to build up any kind of fund by the time you are 60 or 65. As you are in your mid-40s, you still have 15 to 20 years of regular savings ahead of you.

You mention the fact that your income/business profits can fluctuate. Committing yourself to a fixed regular premium is therefore not advisable. The first rule you should follow is not to over-commit yourself. A good savings plan will allow you flexibility in the amount you wish to pay and the frequency of your payments. You should elect to save an amount every month into a plan that you can afford. If anything, when you can afford to save more, you would increase the amount of premium you pay. Also, if you are in a position to be able to top up the plan with the occasional lump sum, then you can do so.

Stopping and starting your contributions to suit your lifestyle is also an important factor. Check that the savings plan allows you to freeze your premiums if the need arises. Twenty years is a long time to save and no-one knows what other financial commitments may arise in the future.

What is important is that you must look to start a retirement savings plan. If you don't then you are leaving yourself entirely in the hands of the state scheme. The amount of state pension you will receive is very restricted and is capped. Don't rely on others to fund your pension - do something yourself and for yourself. Any private funding you make is creating your own private retirement nest-egg.

Please address any financial questions to: Mark Hollingsworth, c/o The Sunday Times, PO Box 328, Valletta CMR 01. Alternatively he can be contacted on 2131-1121/9984-2614 (office hours).

Past performance is no guide to the future and except where amounts are guaranteed the price of your investments (and the currency in which it is denominated) may fall as well as rise. Malta exchange control regulations must be observed. Your personal tax situation will depend on residence. Always consult a professional adviser. This article does not intend to give investment advice and its contents should not be construed as such. Readers are encouraged to seek professional advice on their personal financial situation.