Is it worth saving for old age? The question must worry millions of workers.

Particularly those on average and lower incomes, when they hear that pension funds lost a quarter of their value in the year ending in March.

The shock figures, from researchers Russell/Mellon CAPS, emerged from a survey of 82 fund managers with nearly £200 billion in fund assets.

At the same time, research carried out by the Institute of Directors (IoD), in a report called Crisis, What Crisis?, confirmed the Sussex workforce could be heading for a not-so-comfortable retirement.

Sussex IoD chairman Margaret Devlin said: "Sussex is facing a pensions crisis. The vast majority of people in East and West Sussex don't have the required pension provision to fund their ideal retirement."

The pain, at a personal level, is getting greater as employers switch from final salary "defined benefits" schemes to cheaper, money purchase "defined contribution" schemes.

These "defined contribution" pensions are particularly tough on somebody retiring today with shares at current low levels. The total value of pension funds has fallen for three years in a row.

Few people think seriously about pensions until retirement looms - when it is usually far too late.

Today's pensioners, many of whom saved in the good years when pension funds were hugely in surplus, are scarcely having a ball.

For many people still in work, the second pension is looking decidedly shaky because of weak stock markets, unwise company pension "holidays" and Gordon Brown's controversial decision to siphon out £5 billion a year from private pension funds by a tax change the moment he arrived as Chancellor in 1997.

Yet Barclays Bank says half of all adults - 53 per cent - have said they are simply too busy to organise their long-term finances.

This year, the problem comes closer to home with new-style pension statements (Statutory Money Purchase Illustration or SMPIs) quoting the actual spending power of your pension in year one in today's money and intended to persuade savers to top up savings while there is still time.

The only real solution, says the Consumers' Association, is to Take Control Of Your Pension, the title of its action pack to ensure workers save enough for old age.

Jonquil Lowe, author of the action pack, said: "A comfortable retirement is within most people's reach.

"But consumers must be realistic about their goals and draw up a pension strategy to steer a course towards the retirement they want."

While alternative investments - buy-to-let properties and ISAs among them - have attractions, private pensions still have big advantages:

Employers pay into the worker's pot as a tax-free benefit
Workers still enjoy tax relief up to their highest rate on anything they pay in
Contributions are invested and grow through the additions of income and capital gains which are tax-free.

Although the eventual pension is taxable, a large tax-free lump sum can be withdrawn when the pension is drawn.

Even after recent setbacks and Maxwell-style scandals, Ms Lowe maintained pensions still have quite a lot going for them "but to earn a pension of £1,000 a year from age 65 increasing in line with rising prices, you need to save around £11 a month from age 20, £30 at age 40 and £59 a month if you leave it to age 50".

This is her step-by-step guide to getting those retirement sums absolutely right:

1 Calculate how much money you will need to live comfortably in old age. Experts assume it is somewhere between a half and two thirds of the total earnings in the final year at work but the action pack helps savers to reach their own calculation.

2 Send a BR19 form - included in this pack but also available from DSS offices, the Department of Work and Pensions (DWP) web site or by calling 0845 3000168 - to the National Insurance headquarters in Newcastle to determine the total State pension you will get if contributions are maintained at current levels.

3 Try to diversify savings as early as you can to reduce dependence on that private pension. Some 16 per cent of current pension income comes from earnings as pensioners hang on to casual jobs.

4 When choosing a personal/stakeholder pension, look at past performance and levels of charges. The more a provider takes away in charges, the harder your pension fund has to work - and it might even be worth taking a personal pension plan with charges lower than a stakeholder.

5 Learn to prioritise spending early on - nobody gives a thought to buying 20 cigarettes but think how much would go into your pension pot if you kicked, or even curtailed, the habit?

6 Remember, despite the gloom, that the generation about to collect its pension - post-war baby boomers - is likely to be the richest in history, thanks to soaring property prices and rising share prices for most of their lives.

7 Is it worth paying for advice? Not for simple stakeholder pensions from suppliers like Legal and General, where an intermediary collects a commission fee from the provider.

On complex cases, financial advisers either charge commission or an hourly fee. Some advisers will take the commission and set it against their hourly charge.

You can find a specialist pension adviser through IFA Promotion (0800 0853250) or Money Management National Register of Fee-Based Advisers (0870 0131925).

But the pack is an ideal place to begin your research. Ms Lowe said: "If the last three years of plunging share prices were typical, the argument for saving for a pension would be weakened.

"Almost certainly, they aren't. Equities are almost certainly the best way to save for those in their 20s, 30s and 40s who have time for markets to recover.

"That means pension plans because we mostly lack the time and knowledge to trade shares on our own behalf."

*Information: Take Control of Your Pension, an Action Pack from Which? Books, part of the Consumers' Association, can be ordered on Freephone 0800 252100. It costs £10 99, p&p free.

Friday May 9 2003