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INSIDE TRACK: Navigating the new pension landscape is not easy

FOR my morning commute from an unfashionable corner of south London to The Herald's offices in the City, I have a choice of railway stations.

Lots of trains pass through the first but they finish a 20-minute walk from the office. Travelling from the second is quicker because the route goes into the Square Mile, but the trains are less frequent so if there are any problems I face a scamper to get in on time.

Each morning I weigh up the chances of leaves on the line and decide my route accordingly.

Pensions are as exciting to most people as the travel habits of a London commuter. But when it comes to our retirement we are increasingly being asked to make decisions on subjects for which it is hard to get information and difficult to make a judgment.

The wrong decision about my commute results merely in a sweaty arrival. Getting pension saving wrong is more serious and long-lasting.

The last fortnight has seen great and unexpected upheaval in the pensions system. The upshot is that we will have to do more ourselves.

The demise of pension schemes that guarantee to pay out a proportion of wages means many of us already have the responsibility for the investment decisions to build a nest egg. As a result, many - particularly private-sector workers - don't save at all.

The effective abolition of the requirement to buy an annuity providing an income, while undoubtedly a radical reform of a flawed market, puts the responsibility on the individual post-retirement as well. We can decide when and how to take the money out. For many there will be the attraction of using the funds for short-term purposes: repaying debt or helping a family member.

Most of us are very bad at making long-term decisions. We are over-optimistic about our investments and tend to underestimate our lifespans.

If insurer Legal & General is correct, the market for annuities could shrink by 75%. This could mean an even worse deal for those who still want a fixed income.

For some, such as Mayor of London Boris Johnson, who joshed about profligate pensioners eating dog food, it is all a jolly jape.

For most people on middle and low incomes saving for retirement is not just a romp, and the Government had been taking some good steps in assisting us. The gradual introduction of auto-enrolment, which requires employees to actively opt out of schemes, reversed the trend of falling savings. More rule changes announced last week should reduce charges on some schemes and improve the way they are run.

Of particular concern is whether the annuity changes will lead to a further cuts in employer contributions, making it even harder to save for old age.

The number of employers contributing more than 8% of wages has been falling and some companies are using the minimum 1% required under auto-enrolment as a new standard rate. The revamping of pensions as just another savings scheme gives employers even less reason to put in money.

"Old age is the most unexpected of all things that happen to a man," said Leon Trotsky before an ice pick put an end to his. Some things are too big and too complicated for us to handle alone.

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