How much do I need to save?
You don't need to panic about falls in the value of your pension pot. With about 40 years to go before retirement, you can expect to live through plenty of future stockmarket ups and downs.
The important point is to start building a retirement fund, even if you can't afford to put much away.
If you save £100 a month you'll be on target for an annual income of £5,200; £200 a month would give you £10,400; while £20,800 would require £400 a month.
This is often an expensive period in life, characterised by house purchases and the arrival of children – but don't forget you should add to your pension fund as well.
Also look to tuck away any rainy-day cash in an ISA as this can be earmarked for longer-term savings while remaining accessible for emergencies.
Someone starting a pension in their mid-30s, who earns £30,000 and wants to retire on half their salary, would need to put away £575 a month.
You are starting to run out of time to build a decent pension pot once you hit your forties, so you'll need to start putting away as much as you can – and as fast as you can.
Even if you are already contributing to – and regularly monitoring – your pension contributions, you should continue putting any surplus cash into ISAs.
As a general rule, if you are in your mid-40s and want to retire on half your income, you would need to be putting away around 40% of your salary.
Invidivual Savings Accounts were introduced on 6 April 1999 to replace personal equity plans (PEPs) and tax-exempt special savings accounts (TESSAs) with one plan that covered both stockmarket and savings products, the returns from which are tax-exempt. The ISA is not in itself an investment product. Rather, it’s a tax-free “wrapper” in which you place investments and savings up to a specified annual allowance where the returns (capital growth, dividends, interest) are tax-exempt (you don’t have to declare ISAs and their contents on your tax return). However, any dividends are taxed within the investment, and that can’t be reclaimed.