On the face of it, the Government’s move towards scrapping the default retirement age is a welcome one. After all, it doesn’t seem right that once people get to a certain age, they are deemed past it, fit only for the scrapheap.

Image: Terrence was insistent that he wasn’t over the hill just yet

However, a cursory glance at the state of the public finances suggests that the government review is a route Harriet Harman and her colleagues have been forced down.

The first provision to provide a state pension in the UK was passed over 100 years ago, with the Old Age Pensions Act 1908, entitling those aged 70 or over, of good character and not considered as lunatics to claim five shillings a week, about £20 in today’s money. The amount was actually quite low, as the Government, while recognising its duty to provide for its citizens in old age, were keen people made their own provisions. Some things never change.

The point is that when the idea of a state pension was first mooted, the take up was low as many were not eligible as they earned too much (only those earning less than £31.50 a year benefitted) or, with a life expectancy of 52, they died before they could claim their five shillings.

Today, state pensions can be claimed from 65. With life expectancy now at 77, the weekly entitlement up to £90.20 and around 12 million claimants compared to 500,000 in 1909, it does not take a mathematician (and believe me when I tell you I am not) to see that the Government is being put under far more financial pressure than the initiative was originally designed to do.

The current state pension system is based on a model that is over a hundred years old and is buckling under pressure it was never designed to withstand, in the same way that age-old copper wire has proven unable to cope with the demands of super-fast, super-modern broadband.

As we’re looking back, it can be no coincidence that as the generation of post war baby boomers approach 65, the Government gives them the power to stay in work, further contributing taxes to the Treasury and, hopefully, deferring their state pension to build up higher payments.

But the old maxim still applies, whether the default retirement age is scrapped or not. People will leave employment for the good life when they can afford it, so those in a position to drop down a gear will continue to do so, regardless of any new legislation that is passed.

The move towards discussion on pensions is encouraging, as evidenced by the unveiling of auto enrolment which will follow New Zealand’s model of shifting the emphasis from opting into a scheme to opting out of one. But there are still real issues to be tackled; if the default retirement age is scrapped, then the requirement to take an annuity by 75 must be looked at, for instance.

And, with the public purse more strained than a Darren Anderton hamstring, how much longer can final salary schemes, much loved by civil servants and MPs, be sustained?

James Henderson, Online Reporter, Moneyfacts Group

With the new year only a week old, some of you may already be struggling to stick by your new year’s resolutions.

Giving up smoking or losing weight might seem a good idea on 1 January. However, return to work and all the daily frustrations which a cigarette or chocolate helps to temper come flooding back.

Image: Bang goes the diet for another year

Indeed, according to recent research, over three quarters of people who promise to make a positive change in the new year eventually fail in their attempts to do so.

Despite this, it is encouraging that a separate study by Which? has just revealed over half of people (56%) who have made a resolution this year have made money-related ones.

Research on what the Government’s new year aims might be is limited, but it has been told that tackling the pensions crisis should be near the top of its list.

Pension provision in the private sector has continued to deteriorate over the past year and with seven million people in the UK still not saving enough for their retirement, urgent action is required.

The Government’s great white hope is the personal account, or National Employment Savings Trust (NEST for short), as it has just been renamed.

Due to come into effect from 2012, the accounts will provide a simple, low-cost pensions savings vehicle, giving all employees the right to a good quality workplace pension with a contribution from their employer.

Key to the regime, however, is that employers will have a duty to enrol their eligible employees into the scheme automatically (provided they are not already in a better one) and make payments if the employee doesn’t opt out.

While the initiative is sure to bring more pension savers on board, concerns persist that some employers will struggle to absorb the cost of implementing the scheme. It is also feared that some will take the opportunity to level down the benefits available from their existing pension schemes merely to meet the minimum requirements.

Indeed, according to the Association of Consulting Actuaries, around six in ten employers intend to review their arrangements ahead of 2012, while a quarter are considering benefit reductions to offset the cost of increased membership through auto-enrolment.

Despite this, if workers with little or no pension saving are encouraged to start putting something aside, then the scheme will surely have been a success.

However, if your resolution was to sort out your finances in some way, it’s worth remembering that there is no time like the present to start saving for your retirement. Why wait until 2012, when you could be getting a head start right now?

Tim Leonard, Senior Reporter, Moneyfacts Group

Having taken a back seat while the credit crisis and recession hogged all of the headlines, the problem of the ticking retirement time bomb facing the UK seems ready to reclaim its front page crown.

Image: Resisting temptation was not one of Dave’s strong points

While things were far from rosy in the pension’s world before the events of the past couple of years, the mire now seems to have grown even deeper.

The problems are well chronicled: people are living longer than ever, yet their retirement plans are often woefully inadequate.

The state pension system is creaking under the strain, while the final salary scheme is in slow but terminal decline.

As a result, the burden of responsibility for pension provision is now falling ever more squarely on the shoulders of each individual.

However, with belts being tightened everywhere, how best to get the man in the street saving for their retirement is the 64,000 dollar question.

A recent survey from Aviva found that 85% of people managed their finances on a time horizon of one year or less, so tying up cash in a pension for the long term was not high on their agenda.

However, what if they were allowed access to their pension pots if needed? Would this help break down the barrier to pension saving?

The concept is not new. In the US, people can take loans from their own pension funds and then pay them back with interest. In cases of hardship, permanent withdrawals can also be made. Meanwhile in New Zealand, funds can be withdrawn permanently under certain circumstances, with no obligation to repay.

The argument for introducing a similar model in the UK is that it might encourage savers to make bigger contributions to their pension plans, safe in the knowledge it is readily at hand if needs be. Indeed, research from the US found employees with pension schemes which permit early access contributed from 0.6% to 3% more salary to their pension than those in plans without it.

The flip side is that it could have the opposite effect to that desired and pension pots might shrink.

Greater contributions might not materialise, while withdrawing funds late in life would leave little time to repay the loan. Some might choose to halt contributions while repaying their loan, so would merely be replenishing their pot rather growing it.

While there’s little suggestion this is currently in the Government’s thinking, it is surely not an option to be ruled out. Careful policing by the authorities would definitely help but ultimately the success of any such scheme would depend on the good sense of the individual: a greater willingness to save for their future now, but an iron will to leave this money alone.

Tim Leonard, Senior Reporter, Moneyfacts Group

Unless you’re one of the lucky ones, the retirement you face may be anything but the one you imagined and deserved.

Image: Ollie realised that there was little point getting older and not getting wiser

With things only set to get worse as we move forward what can you do to improve your financial returns in retirement?

More potential retirees will be working longer than originally planned but delaying retirement doesn't have to be as disastrous as it seems. By working longer and putting off taking benefits from your pension, it should provide a higher level of income when you eventually start drawing it. What's more, if you continue to pay contributions into your pension fund during these extra working years, you could significantly boost the value of your scheme.

If like many your pension is heavily invested in the stock market, its value has probably dropped off significantly. Although no one knows what's going to happen to share prices in the future most experts believe that they will begin to climb; a strong argument for delaying retirement to allow the value of your pension to recover.

The annuity option is also taken by many in retirement, with the annuity rates paid obviously higher for older people to compensate for paying out income over a shorter period. As well as your age, annuity rates are also based on prevailing interest rates and the yields on gilts and corporate bonds. As we could be in for a period of higher inflation and interest rates, holding off before buying an annuity may be to your advantage if annuity rates rise.

It makes sense to think about deferring your basic state pension too. You can take the missed income as a cash lump sum (plus interest of at least 2% above the base rate), or as a higher weekly income later on which is based on how long you wait before claiming your pension.

Pensioners are entitled to a range of financial assistance, from certain tax allowances and welfare benefits, to energy costs, all of which are not being claimed by enough people. Those not expecting a full basic State Pension are able to improve their State Pension by paying up to six years of voluntary National Insurance contributions for years going back to 1975. Consideration can also be given to an equity release mortgage, which can boost incomes. Although it will also eat into the inheritance you can leave to your children, Are there any measures that could be introduced to alleviate the pension crisis? Perhaps unspent pension pots could be left to any heirs on the proviso that the pot could only be used to fund a pension, at least that way retirement provision would be continually improved, with both personal and public finances benefiting.

The choice for many is clear; retire and have very little money and a glum existence, or work part-time and have a better lifestyle. As the gap between public and private sector provision grows, a form of pension apartheid is upon us. Things will remain tough for pensioners for a while to come, but hopefully I have shown there are ways to combat this. If MPs and Sir Fred Goodwin can both bow to pressure and relax their pension demands anything is possible!

Lee Tillcock, Editor of Moneyfacts.

You may not have noticed it, as this has been quite a busy time in Westminster, but the new Equality Bill, set to become law in 2010, is to put an end to age and gender bias, including in the sale of financial products.

Above:Hands up all those who think they are getting the best rate?

Banks and building societies may be prevented from treating some customers more favourably than others, including offering accounts aimed at older savers. Regardless of age the Bill does raise issues over gaining value for your savings.

The 50+/silver saver accounts should recognise that older people have saving needs and requirements that often focus on simplicity, reliability and regularity of payment. Accounts designed specifically for older savers do not always offer rates higher than other accounts in the market. Best deals are not necessarily those claiming to be the most appropriate, with rates on these accounts on the whole lower than the best instant online savings accounts available to all.

The Government recently increased the ISA limit for those over 50 earlier than the rest of the population, slightly at odds with their legislative policy. The Bill has been described as unworkable, misleading and gobbledygook, which surely makes it a certainty then. Given the current difficulties with politics, upsetting those most likely to vote would previously have been unwise. Alienating the whole electorate however, may be a cunning plan to ensure no one even bothers to vote.

Whilst the Government is keen to discuss the issue of age at a national level, in my humble opinion, there is a more pressing need for the spotlight to focus on the opposite end of the age spectrum. When not discussing MP's expenses, this week's news headlines have been filled with the details of a new family unit consisting of a Mummy, Daddy and wee one, all aged 15 or under. Are they all able to access children's accounts, never mind child benefit and child trust fund allowances?

The vast majority of the UK's eight million pensioners rely on savings or share-based income during their retirement. Compounding this, the Institute for Fiscal Studies estimates that due to the continued high annual inflation in food and domestic energy costs the poorest pensioners over the age of 80 are facing an inflation rate of 6.7%‚ compared with the official rate of inflation of 3%.

The facts are clear. Now more than ever savers need to shop around to get the best deal for their money, with the ideal place to start. With any rate rise unlikely until next year, this is a good time to ensure you are keeping any savings in the right account.

Lee Tillcock, Editor of Moneyfacts

Pensions are in peril, and those approaching retirement are facing some particularly difficult decisions right now. But judging by last week's Budget you would never know it.

Left: Rex was relieved he never reached retirement

Since the onset of the credit crunch the average pension fund has lost a third of its value, whilst historically low interest rates have seen pensioner income cut by almost a quarter in the last twelve months.

More recently, this tough environment has been compounded by the Government's quantitative easing strategy. Designed to stimulate lending and spending, it has had the unfortunate affect of sending annuity rates into freefall. Annuity rates have fallen by as much as 10% since their peak last September and are down 3% during the last month alone.

Surely then, this was the ideal time to announce a series of measures to encourage greater pension saving and to help pension funds desperately struggling with their huge deficits? Sadly, it seems not. Instead we were served up what appears to be a series of quick economic fixes which will simply create as many pension problems as they solve.

The law of unintended consequences is no stranger to UK pension's policy and looks certain to raise its ugly head again following the Government's decision to restrict tax relief on pension contributions for those with incomes above £150,000 from April 2011. At first glance, this proposal may seem fair enough. However, dig a little deeper and what appears to be a £3.1 billion raid on the pensions of the rich could potentially have a devastating impact on the retirement hopes of many lower earners as well.

This concern stems from radical proposals hidden in the Budget which suggest that high earners will also see their employer's pension contributions taxed as a benefit in kind. Early estimates indicate that if this controversial move goes ahead, higher rate tax payers could be stung by an average £10,600 a year.

The danger is that by making pension benefits a less attractive form of remuneration, senior executives will simply disengage from the very company pension schemes that they have set up. The knock-on effect of senior managers losing interest in pensions will inevitably be the demise of the few quality private sector final salary pension schemes still in existence. After all, why would company directors continue to finance these expensive schemes if they are unlikely to benefit themselves?

Expect to see the remains of the last private sector final salary scheme on display in the National Pension Museum soon!

Richard Eagling, Editor, Investment Life & Pensions Moneyfacts

Britain's defined contribution pension assets lost 10% of their value during the month of February, plunging by £42 billion as a result of falls in equity markets, according to Aon Consulting. The latest drop means £182 billion has been wiped off the value of 3.7 million UK worker's pension accounts since the credit crisis began in September 2007, representing a slump of more than 33%. However, shrinking pension pots are not the only problem, as annuity rates are worsening as well.

Helen Dowsey, principal at Aon Consulting, said the situation looks bleak and called on soon-to-be retirees to consider all the options open to them. "It might be appropriate to convert only a portion of your pension fund to an annuity now and convert the remainder at a later date," she added.

A government report examining the effect of the new pension reforms on the incentive to save for retirement has attracted criticism for its lack of clarity over a number of key issues. While the study claims that 95% of savers will see a return greater than their own contributions, it has been suggested that this means savers will see little or no value from their employer's contributions. Meanwhile, the Government has been told it should announce now that means tested benefits will be scaled back and that it expects workers to save for their own future.

"Continuing to signal that future pensioners will be bailed out in the same way creates moral hazard amongst today's workers, meaning that many who should save will not," said John Lawson, head of pensions policy at Standard Life.

A widening gap between the best and worst annuity rates available has highlighted the importance of consumers shopping around for the best deal, according to Investment Life and Pensions Moneyfacts. The difference between the best and worst standard open market rates currently range between 11% and 17%, depending on age and sex, for a £10K purchase price, while the gap rises to between 16% and 22% at the £50K price point. The uplift available from an enhanced rate as a result of either health or lifestyle considerations could also radically improve the income payable.

"The variance between the best and worst rates plus the wider introduction of postcoded annuities and the growth in enhanced options has produced a more complex annuity market than we have seen previously," said Suzanne Greener, deputy editor of Investment Life and Pensions Moneyfacts. "As a result, pensioners could lose out significantly if they don't take the time to research the best deal for their individual circumstances or take advantage of an adviser's expertise."

Retirement savers are being penalised as key tax breaks have failed to keep pace with inflation, according to MetLife. Four out of seven tax breaks analysed over the period from 1997 have lagged inflation by as much as three times with inheritance tax (IHT) affected the most. If the IHT threshold had been raised in line with house price inflation it would be £547,505 compared with £312,000 at present. Amongst the other tax breaks which have significantly failed to keep pace with inflation are ISA limits, higher rate tax thresholds and the personal gift allowance.

"Savers need to keep in mind the effect inflation is having on their tax breaks," said Dominic Grinstead, strategic development and marketing director at MetLife.