When is saving into a pension a complete waste of money? And if you can't afford to save right now, will you be OK? Harvey Jones investigates.
One of the most plausible excuses people give for failing to start a pension is that they can't save enough money to make it worthwhile.
After my recent article trying to frighten people into saving, In Retirement Nobody Can Hear You Scream, several lovemoney.com readers posted messages saying that on their incomes, they simply couldn't afford it.
Our sister website The Motley Fool calculates you need to save Half a Million Pounds to really enjoy your retirement, so I can see their point.
That is far beyond the reach of most people. No wonder nine million people are saving nothing whatsoever.
This got me thinking. At what point is doing nothing for your retirement a rational approach?
Can pay. Must pay
Let's start by whittling out those who definitely should be saving.
First, this category includes everybody who can afford to do so. If you have a decent income, it is your moral duty to save for retirement, rather than blowing your cash and expecting the taxpayer to provide. It is also the only way of maintaining your current lifestyle after you quit working.
As if you needed more encouragement, the Government even gives you pension and ISA tax breaks to help you on your way.
Time is on your side. Don't waste it
Second, anybody in their 20s or 30s should be saving, even if they think they have better things to spend the money on.
You may only be able to manage tiny contributions now, but these are worth more than anything you invest when you are older, because they have longer to grow in value, explains Jane Baker in How To Double Your Pension.
As Tom McPhail, pension specialist at Hargreaves Lansdown, told me while preparing this article: "To suggest anybody under the age of 40 shouldn't bother investing in a pension is a counsel of despair."
In other words, fail to invest in your pension when you're young - and you'll only have yourself to blame when you end up old, poor and miserable.
In fact, here at lovemoney.com, we go so far as to recommend you start saving into your child's pension as soon as they're born. Seriously - it might even make your child a billionaire!
Mid-life pensions crisis
Having said that, anyone in their 40s or 50s should also be saving, even if they haven't saved a penny so far.
You've left it a bit late, but may still have another 15 or 20 years' working life ahead of you.
You may not hit that dream half a million, or even come close, but if you set aside all you can, top it up with tax relief, Boost Your Pension by 52% by deferring it for up to five years, and bring in some extra cash with a part-time job, then you should muddle through in reasonabe shape.
That's better than simply giving up.
Ooh, aah, just a little bit
So that's a lot of people who should be saving into their pension. I know many of them will be on low incomes, and will be reluctant to bury their money in a pension fund, which they can't touch until age 55 at the earliest.
But you don't have to save in a pension in order to save tax-efficiently for your retirement. It might be better to start with a cash Isa, which is lower risk and tax-free, but lets you get at your money in an emergency.
Somebody on a low income aso has more to gain by saving £1,000 than a higher earner. If you've been living on a financial knife edge, having just a bit in the bank can give you a fantastic sense of security and achievement.
Although I admit it won't buy you much of an annuity.
Read more about the benefits of Pensions versus ISAs.
Mean test
Things get trickier when you take the case of somebody in their 50s with zero pension or savings, and little income to spare at the end of the month.
They have two worries. Saving seems hopeless, because they are likely to assemble only a tiny sum, plus any savings they do muster risk being taxed into oblivion by the Means Test.
The Means Test is a worry, partly because people on low incomes can face marginal tax rates of 70% or more, and partly because it is so complicated.
But from November, the first £10,000 of pensioners' savings will be exempt (up from the current £6,000).
So that's something.
And the state rewards those over 65 who have saved for their retirement, by granting single people savings credit up to £20.40 a week, and couples £27.03 a week. This is open to those with incomes up to £181 a week and couples up to £266 a week.
And between you and me, if you did seem likely to fall foul of the Means Test, I don't think the Department for Work & Pensions could complain if you decided you needed, say, a new kitchen or a holiday.
Plus of course pensions legislation is changing all the time, and the Means Test could have been scrapped or radically amended by the time you retire.
So again, the balance is in favour of saving rather than doing nothing.
The exception that proves the rule
I embarked on this article in a bid to find somebody who really shouldn't be saving for retirement.
It wasn't easy but I've racked my brains - and finally I've thought of someone.
If you have major debts, such as an overdraft or credit card balance, you should focus your fire on clearing them first. The interest is likely to cost you much more than you'll ever reap from an investment or savings plan.
Plus, if there is one thing worse than going into retirement without a pension fund, it's having debts as well.
But once you are back in the black, start saving.
So with one notable exception, everybody should be saving for their future right now, although not always in a pension fund.
No excuses. Sorry.
More: How to choose the right SIPP | In retirement, nobody can hear you scream