These days, to survive in old age you must invest

P-p-p-pick up a pension may be the message from the government and the pensions industry, but only half the adult population has taken the advice. Pensions mis-selling has not helped. More than 400,000 people have accepted compensation for losing out when they were pressured into leaving company pension schemes for personal pensions. A further million cases are pending.

P-p-p-pick up a pension may be the message from the government and the pensions industry, but only half the adult population has taken the advice. Pensions mis-selling has not helped. More than 400,000 people have accepted compensation for losing out when they were pressured into leaving company pension schemes for personal pensions. A further million cases are pending.

Having a pension plan makes sense for everyone under 50. The rules allow you to pay in a larger share of your income as you get older, but starting really late can be worse than not starting at all.

"Assume you are 55, and have made no arrangements" says Penny O'Nions, the Amersham-based independent financial adviser. "Commission and insurers' expenses can take up much of the early contributions, and they have little time to grow. So saving through ISAs may be wiser."

Belonging to a company pension scheme is best of all for long stayers. Both you and the company contribute - and occasionally the employer pays all the premiums, as happens in the Civil Service. In a perfect world, the pension would be linked to final salary, though most depend on how successfully the money is invested.

AVCs, or Additional Voluntary Contributions act as a potential pensions booster, increasing your fund. Charges on a company's AVCs are always lower than those organised outside.

People leaving their jobs and company pension used to do badly. Now the funds have to raise the value of past contributions by the rate of inflation - up to a 5 per cent ceiling.

Personal pensions make sense for regular job-changers and the self-employed. They can take two forms. If you have a unit-linked pension, premiums go into a fund, where their value will move directly in line with the investments and other assets the fund holds. Most plans allow you to stop and start contributions as you want.

Ironically, the best time to contribute is when share prices are falling sharply, for you buy assets at bargain basement prices. But ultimately the fund's value will depend on investment conditions at the time you retire.

Unitised with-profits funds offer slightly more certainty. Insurers have annual bonuses, which add extra units to those you hold already. They rarely fall in value, if you retire at the expected date, though they may if you retire early. But there are no guarantees.

Stakeholder pensions come on stream in 2001, and will be different from those available now. "The only charge will be a 1 per cent levy a year" says Tom McFail of independent advisers Torquill Clark. "Most will be simple tracker funds, mirroring what happens to the FTSE or the All Share index."

How much pension your money will buy depends on annuity rates, though there is flexibility on when you must turn three-quarters of your lump sum into income for life. Today you now get 40 per cent less pension for the same money as you would have done five years ago, according to the Annuity Bureau. At least rates are just starting to rise.

Rising life expectancy will make it steadily more expensive to maintain the basic state pension's value. People need to invest to survive in old age.