Could you survive on £168.60 per week?

If you retired tomorrow £168.60 (rising to £175.20 in April) is the maximum basic pension you'd get from the government each week. Let's face it: it's not a lot of money. Most people can't (or don't want to) rely on this as their sole source of income in the future. After all, it's hard to imagine silver surfing your way around the world on such a tight budget.

Multiply's handy ‘in app’ pension calculator is a great way to start looking at what you need to do to afford your epic second childhood.

So let's talk pensions.

The headline is that pensions are a great tax-efficient way of saving for your future, with all schemes currently qualifying for relief up to your highest rate of income tax. This means that some of the money that you would have paid in tax to the government goes into your pension pot instead.

There are three main types of pension: State Pension, Defined Benefit, and Defined Contribution.

State Pension

This is what you'll get from the government when you reach State Pension age.  It should be simple, but it's not. The amount you get is dependent on a whole range of factors including age, gender, and your National Insurance record.

The criteria are constantly changing so it's worth keeping this link in your favourites to make sure you're up to date.

In order to qualify for the minimum you need to have made at least 10 years of National Insurance contributions. In order to get your equivalent of the £168.60 in the future you will need to be credited with 35 years of contributions.

If you have worked overseas things get more complicated, but the link we referred to earlier also provides guidance on this too.

Finding out the status of your State Pension has never been easier as the government has included a handy tool in its website which you can access here.

Defined Benefit

Defined benefit pensions are generally provided by your employer and are often perceived as the gold standard. They are all but extinct (following a change in regulation in the 1980's) so many of you are unlikely to have come across them, but a few companies still offer them even today.

The core feature of these pensions is when you retire, the amount of money you receive is based on your salary and the number of years you worked for the company.

These can be valuable pensions, and if you are lucky enough to have one the general wisdom is to hold onto it. That said there are still some perfectly valid reasons that may make you want to transfer them ranging from performance to flexibility to inheritance considerations. But any decisions should not be taken lightly. For all transfer values over £30,000, you will need to consult with and obtain sign-off from a regulated Independent Financial Adviser.

Defined Contribution

Defined contribution pensions are the most common ones around. You can get one via your employer or you can set it up yourself. Essentially you are saving for your own future either through through a company or off your own back. When you save through your employer, they generally make a monthly contribution too, so some free cash to boot. The cash that is saved is then distributed in a whole range of investments ranging from cash to government backed bond to stocks and shares and property.

These pensions often offer great flexibility. The amount of money you receive when you retire is a combination of how much has been saved into the pension and the performance of the pension investments over time.

Is that all there is?

No, of course not, that would be way too easy. You also need to be aware that:

• Most pensions come with strict rules around the age that you can access them.
• It's important to balance your short, medium and long term goals and save for all stages of life's journey.
• You need to get to grips with the nitty-gritty of your pension, especially how much you can take out and when, and those all important consequences of the decisions you make such as a lower income at retirement.

This can all be a little overwhelming, especially when there are so many different types of defined benefit and contribution schemes. The good news is that information is not in short supply.

Pensions are not just about the product; that's only part of it. There is so much more to setting yourself on the right path to your second childhood.

Focus on the big picture

Everyone is unique, so there are some decisions and actions only you can do when you are saving for your future. We have listed our top tips below.

1. Establish what savings, investments and other assets you have already got. Pensions might not be your only source of retirement income.
2. Understand when and what lifestyle you want when you retire and how much you will need to fund that. If you are planning to spend half of your year in sunnier climes, then you need to consider that as part of your plan.
3. Be willing to start small if that's all you can afford at the time. Some people get scared when they see a big number they need to put away each month. But doing something is always better than doing nothing.
4. Regularly review your savings and investment plan. Life changes and so should your plan, so check in every now and again to make sure it still works for you.
5. When in doubt seek out specialist advice. Independent regulated financial advice has never been so accessible...

The TL;DR

Pensions are a brilliant way to give yourself an income in the future. They are a valuable addition to a much wider savings and investment plan, but it's not a case of one size fits all. Once you have done the fun part of thinking about what you want, Multiply can help you with the heavy lifting. It helps you get on the right path so when you finally hang up those spurs you can kick back and enjoy.

Although you shouldn't let the tax tail wag the investment dog the tax year is coming to an end, so there's even more incentive to get started as those allowances for the current year won't be around for much longer.