A QUESTION that we receive regularly these days is ‘When will I be able to afford to retire?’ But, just as important, is who will decide when you retire – you or the Government?

The recent Conservative Party conference drew attention again to the fact that the country is having difficulty affording the state pension and floated the idea of increasing the state retirement age from 65 to 66, albeit not before 2016 for men and 2020 for women.

This would affect all men currently aged under 58 and women aged under 54 and follows the gradual increase in the State Retirement Age for women from 60 to 65, which is already being implemented.

When you consider that the state already offers increased benefits to people who voluntarily defer taking their State Pension beyond their state pension age, it is not difficult to see that the only way many of us will be able to retire on anything like an adequate income is by making adequate private provision, or by working for longer and deferring retirement to an older age.

This prompts the question of whether your private pension provision will be sufficient to enable you to retire when you want, on the income you want.

The current financial crisis has seen the development of a huge deficit in the assets of final salary pension schemes compared to their liabilities.

Many final salary pension schemes have closed to new members, ceased benefit accrual for existing members and been replaced by defined contribution (money purchase) schemes.

In fact, only four FTSE 100 Companies (Shell, Tesco, Cadbury and Diageo) now offer a final salary pension scheme to new employees; five years ago the figure was 40 per cent.

A defined contribution pension scheme, which includes many company pension schemes as well as personal pension plans, is one that gives no guarantee of what your pension will be when you come to retire.

Instead, the pension you receive depends on how much is paid into the scheme, the net rate of investment return after charges and fees and the annuity rate (the rate at which the fund can be converted to income) when you retire.

Despite the generous tax reliefs available, most people underestimate the amount they need to contribute to their pension if they are to produce a pension that will allow them to maintain their standard of living in retirement.

Do you know what level of pension you are likely to receive when you retire? Will you be able to afford to retire when you want to, or even at all?

How can you find out?

Projections of state pension can be obtained from the Pensions Service by completing form BR19, available from direct.gov.uk/en/Pensionsandretire mentplanning.

Projections of private pensions are available from the scheme provider.

However, neither will provide a comparison with your projected expenditure and show you whether and when you are likely to run out of money in retirement.

A full analysis of your financial position, including lifetime cashflow, comparing projected income and expenditure can do this and can also help to identify any shortfall in retirement provision and the steps you need to take to rectify it.

This is a service now being offered by a number of independent financial advisors and wealth managers and is one that may prompt you to take the action needed to ensure that your retirement age and standard of living are decided by you and not by the Government or a financial institution.

In addition to the level of pension savings you make, other factors that will affect your retirement benefits include the charges taken by pension providers and fund performance. There appears to be an increasing trend in using low charge, passively managed, tracker-style funds, to capture investment market returns, rather than the more traditional actively managed funds, the vast majority of which tend to under-perform their benchmark indices.

So why not dig out your pension and investment details and arrange a retirement test drive with a financial planner to see whether you like the look of your potential financial position in retirement, while, hopefully, there may still be time to do something about it?

■ Nigel Bourke CFP, is managing director of Stockton-based Mercury Wealth Management. For more information, call 01642-670307 or go to mercurywealth.co.uk