The longer you save the more money you need to get a decent pension. That is the message from an alarming set of figures from the financial data group MoneyFacts. The figures show that if you retired in 1994 aged 60 and had saved up £100,000 in your pension fund – which is four times the average – you could buy a pension for life of around £10,000 a year (£9300 for a woman). If you retired today with the same £100,000 of savings you would get a pension for life of barely £6000 (and £5670 for a woman). These amounts are fixed – it is the date you buy the pension that makes the difference. There are two familiar reasons for the fall. First, interest rates and investment returns are much lower now. Second, we are all living longer so the money we have saved has to be spread over a longer time. Add to this the growing caution of the insurance companies which provide these pensions for life – called annuities. That leads them to build in a bigger margin of error by reducing the rates still further. Women get less than men because they live longer. But the rates are converging as life expectancy changes.

The cuts affect anyone who has saved up for their retirement in a personal pension, paid into AVCs (additional voluntary contributions) on top of their work scheme, or whose company pension is the ‘money purchase’ sort rather than a scheme which links the pension to salary – which are not affected. If they retire now they will get far less than if they had retired a few years ago.

The MoneyFacts research also points out the benefits from making sure you get the best deal you can when you decide to convert your savings into a pension. You are free to use the money to buy an annuity from any provider on the market. But most people do not do that – they just accept the offer made by the company they saved up with. That can be an expensive mistake. The difference between the best and the average can be £360 a year for life. Over 25 years that would cost you £9000. Just because you did not shop around.

It is also worth remembering that with annuities bad health is good news. If you are a smoker you will get a higher annuity – because your life expectancy is less. And if you have a severe or chronic illness then you may qualify for what is called an ‘impaired life’ annuity which can be considerably higher still.

From April 2006 new rules may make it easier to avoid buying an annuity – now you have to buy one at 75 and most people should buy one as soon as they retire. But full details won’t be known for some time. We will keep you posted.

Careful with that Cliff
Clarice Cliff (1899-1972) created the bright decorative ceramics associated with her name from the late 1920s to the 1960s. At one time she was looked down on, but now her vibrant, hand painted pieces are widely admired and can be very valuable. Although she has been collected for 25 years, new pieces – and even designs – are still turning up. Joy McCall is specialist head of British Decorative Arts at Christie’s. "In every sale there is something I haven’t seen before. People inherit them, find them, just happen on them. The most common story I get when people call is ‘my friend came to tea and said it was Clarice Cliff’. At Christie’s sale in February a large dish, bought for £1 in a car boot sale, fetched £1920 despite some slight damage. The world record is £39,995 for a larger bowl – in a rare pattern of which only three are known. But Joy’s favourites are the sugar shakers. "They just don’t exist anymore. They are so of their time."

Reproductions as well as out-and-out fakes abound. Joy says start at the bottom. "look at the unglazed body. It should be cream not white and so should the honey glaze under the colours. These are all hand-painted, you can feel the paint and see the brushstrokes."

The hand-painting, done after the pot has been fired, is delicate so use them carefully and never ever put them in a dishwasher. You can call Christies on 020 7839 9060 and experts will give advice by phone or email.

U R low on funds
If you go overdrawn without agreement on your bank account you get stung with penalty charges and punitive rates of interest. Even if it is for a day or a rare mistake the penalty will still be charged. But one bank will send a text message to your mobile phone whenever your balance falls below a certain level, giving you an early warning of a possible overdraft so you can take action. First Direct, which has sent 100 million texts since it started the service in 1999, reckons it has saved its customers £32 million in charges by giving them warnings of low balances. The text will also give you a regular update on your balance.

Any mobile phone can receive texts and it keeps you in very close touch with your money. Don’t worry if you have never sent a text - you don’t have to reply! Lloyds TSB and Nationwide offer similar services.

Muddle over PINs
There is still widespread confusion over the new way of authorising a debit or credit card transaction by putting in a four digit PIN rather than signing a slip of paper. Some shops have been putting up signs saying they won’t let anyone use a card unless they know their PIN. Others have been demanding ID with a photograph from those who do not have an up to date card or cannot remember their PIN. And some refuse to accept a card if the customer cannot not remember their PIN. No wonder people are confused. In fact none of these things should happen.

Chip and PIN can only work if the customer has a card with the new chip and the shop has a machine that will accept the PIN. The latest figures show that about 77 million cards have got the new chip – but that leaves around 50 million that do not. People using old cards will still sign and all shops should let you do that. Although most tills have been converted to chip and PIN, about a quarter have not. Those retailers are taking a risk. If someone uses a new chip and PIN card and commits a fraud then the retailer is liable for the cost not the bank. Those shops should still let you use your card, though they may ask for more identification.

Finally, if you turn up with your new Chip card and the retailer has the PIN pad, but you forget your PIN, you can still sign. The banks recognise that there is still confusion and for some months – probably at least until the end of 2005 – the terminal will allow the shopkeeper to accept a signature with the bank bearing the risk of fraud.

Remember that you can change your PIN to one that is easier to remember at any cash machine. But do not use your credit card to take out cash. That will cost you at least £2 a time.

Grace days cut
Until recently if you forgot to renew your car insurance then most insurers would continue the cover for up to 14 days after it ran out. It was one of the old fashioned services which helped absent minded customers avoid the risk of driving without insurance. Although technically you are not legally insured in that time, if you had an accident your insurer would pay up. But the industry is phasing out this concession.

The change was recommended last July in a report on cutting the growing cost of the estimated one million people who drive around without insurance. Although they are not insured, the Motor Insurers’ Bureau will still pay out for damage or injuries caused. This service costs the insurance industry £500 million a year – paid for by an extra £30 a year on the premiums of honest drivers.

To cut down on this number, insurers now have to notify a central database within seven days if anyone does not renew their policy. Once your name is on the database speed cameras, traffic wardens and police officers will know. And your insurer will not cover you for accidents either. After the end of 2006 the period may be cut still further. So renew your insurance before it is due. Or you could end up in financial and legal trouble.

April 2005

e-mail Paul Lewis on paul@paullewis.co.uk