The great pensions dilemma: should you bother?

Harvey Jones admits pensions aren't perfect, but says the alternative is much worse. His friend Jamie thinks they are the scourge of the devil.

Forget the property crash, the biggest personal financial nightmare facing all of us is the pensions crisis.

We're all living longer and expecting a better quality of life in retirement, yet our state, company and personal pensions aren't going to provide it. Even worse, most of us are in denial about the scale of the problem.

Some 12 million UK adults aren't saving a penny for retirement, according to new research from Lincoln Financial Group.

And my 43-year old friend Jamie is one of them.

Mob rule

I've tackled Jamie about his pensions inertia before, and it didn't do either of us any good.

But this time I plan to do it mobhanded, and I'm roping you lot in to help me. Can we persuade my friend Jamie to start saving in a pension?

Do we even want to try? He may have already left it too late.

The facts

Jamie has a wife and three lovely children aged between four and nine years old. He earns £40,000 a year and lives in a pleasant three-bed terrace on the edge of a pretty market town in Kent.

They need a bigger house, but their mortgage is £100,000 and Jamie doesn't want to double his mortgage to upgrade to a four-bed property in the area (although when his kids become teenagers he may have little choice).

He is a self-employed graphic designer and has seen his income spike up and down in the last year, which only adds to his caution.

And being self-employed, he is wholly responsible for his own pension contributions. There is no employer to make them on his behalf. And alarmingly, he doesn't have a single penny in his pot.

I get a roasting

Jamie and I are old friends, but as our trip to the pub shows, we are very different. I slurp warm ale, he sips fizzy lager. I munch dry roasted peanuts, he loathes them. I will happily talk about pensions, he thinks they are the scourge of the devil.

So I pop a peanut and ask him:

"Have you got a pension yet, Jamie?"

"Nope."

"Why not?"

"They're the scourge of the devil."

And that was only the start.

"I'm not giving my money to the banks just for them to take a huge cut and maybe even lose it. And knowing my luck, stock markets will probably crash the day before I retire. That's if I have any money in my pension, because Gordon Brown will probably have nicked it. And I'm not giving a penny to a financial adviser. They, too, are the scourge of the devil. So tell me, Harv, how well has your pension done lately?"

I mumble something about a 50% drop.

"Exactly."

Let the message boards decide!

Round one to Jamie. You can see why I needed to crank up the message board firepower. So I say to him:

"Are you willing to let lovemoney.com members settle this? They're a community of financially savvy and fair-minded individuals, and one or two might even have a pension of their own. They can decide who is right."

"OK. But they'll back me. Because I am right."

So here are my questions

At the age of 43, has Jamie left it to late to bother saving into a pension? A 40-year old would have to save £220 a month until age 65 to accumulate a pension pot worth £100,000 in today's terms. Jamie, at 43, would have to pay even more.

That would give Jamie and his partner Lucy joint annuity income of around £6,500 a year, or £3,900 if they want it to rise in line with prices.

He says: "Is that all? Rubbish. Anyway, I haven't got £20 left at the end of each month, let alone £220. Forget it."

I say: "That's just an excuse. You didn't save anything when you did have money."

And he says: "That's because pensions are..."

"Yes, I know, the scourge of the devil."

My other question is this: should I stop pestering my friend Jamie and leave him to his fate?

Gotcha!

Jamie doesn't have the answers, but he does have a few questions.

"OK, I admit you've got me slightly worried. So what are my options, given the short time left? Does 40% tax relief make pensions worthwhile? What about saving accounts? Equity release? Or maybe I could push the kids onto Britain's Got Talent, make them famous and let THEM pay for everything?"

"Let's see what lovemoney.com members have to say," I tell him.

Problem solved: never retire

I do make one final suggestion, but it doesn't go down well. I tell him that 1.4 million pensioners are still working in retirement.

"You could be one of them. You work from home, it isn't a physical job, you could keep going into your 70s."

"I don't like the sound of that."

But unless he does something, he might have to get used to it. And so might more and more of us.

More: Become a pensions expert in five days | Make this mistake and lose 20% of your pension!