A little on the top

Around half the working population of 22 million belong to occupational pension schemes which are provided by employers - or sometimes trade associations - and are the most efficient means of saving for retirement.

Apart from some of the smallest firms, most companies now provide a pension scheme and for most people the obvious advice is simple: if you are offered membership, join.

As a member of a company pension you can contribute up to 15 per cent of your relevant earnings to the scheme and get full tax relief at the top rate of income tax.

Occupational pensions are designed to pay out the maximum after 40 years of service - but few of us can look forward to working for the same employer for anywhere near this length of time so it is unlikely that you will be able to clock up enough years of service to earn the maximum pension.

You can top up your pension by making additional voluntary contributions (AVCs) to the pension scheme - in effect "buying" extra years of pension contributions. The fund managers who look after the pension may make a charge for these additional contributions, but charges are usually very low and may even not be levied at all.

The numbers who have taken out AVCs to top up their pensions are low. It is estimated that that only just over 11 per cent, or some 1.2 million people, have done so.

As James Andrews, an adviser to one of Britain's biggest company pension operations, says: "Whenever we raise the question of AVCs with members there is very little interest in them. Most people still seem to think that they can rely on the basic pension."

Any money paid into a scheme through AVCs is locked in. Like the ordinary pension contributions, they cannot be easily transferred to another employer if there is a change of job. Even if the pension contributions can be transferred, there is often a considerable cost involved and a number of long-established company pensions do not allow the payment of AVCs.

If you do not want to make top-up payments into the company scheme there is an alternative: free-standing additional voluntary contributions (FSAVCs).

Like personal pensions for the self-employed or those who work for companies without a pension scheme, these are portable. They can, therefore, be continued, within the Inland Revenue rule, if you change jobs. Free-standing AVCs will also allow you to be flexible on the amount you are contributing to your pension. You are not restricted to drawing the pension income from an FSAVC at the same age as the company scheme, and the level of contributions is invisible to your employer.

Ian Oliver of Commercial Union, says: "One crucial benefit of an FSAVC is that it is likely to offer a wider and more aggressive investment choice than the company's AVC, which is particularly important if your planned retirement is 20 years away and you are looking for strong capital growth." Unlike additional contributions to a company scheme, where the income tax is rebated automatically through the monthly or weekly pay packet, you have to reclaim the tax allowance for free-standing AVCs through your annual tax returns. Otherwise, the tax allowances and rules about FSAVCs are basically the same