FROM recently released government statistics it is now official that life expectancy of men and women is projected to increase from 45 and 49 years respectively in 1901 to 80 and 84 years in 2011.

This means as individuals we are faced with increasing our savings, or extending our working lives.

Alternatively, as the government would have us do, we are to make more adequate pension provision.

With the UK's increasing mortality, declining fertility and the need to fund the retirement of the ageing baby boom of the mid 1940s and 1960s, it is not surprising that there will only be two employed people for each retired person by 2025.

Therefore it is not unreasonable to see the need for people in their 30s being asked to be more self reliant than generations before them.

For the majority of us the state pension provision on retirement for a single person of £ 75.50 a week will not be enough.

This means as individuals we will need to accept in preparing for our retirement there will be a need for greater exposure to the effects of financial volatility that such a decision brings.

With the number of occupational pension schemes estimated by the Association of Consulting Actuaries to be 63 per cent barred to new entrants, and nine per cent having been closed, individuals are now being encouraged to re think their pension planning.

Historically, individuals' planning focused on selecting a provider that could maximise a pension fund to provide the traditional benefits, such as: A tax free cash sum which may be up to 25 per cent of the fund, a lifetime income (pension), a spouses pension, and or a guarantee that the pension will be paid for up to ten years, even if you die before then.

Nowadays those objectives remain important considerations, as well as the importance of shopping around and exploiting the open market open to secure a higher pension annuity.

However, a more important consideration is to make the correct investment decisions at the outset.

It is this decision the Financial Services Industry has tried to wrestle with to provide innovative and flexibile products to meet these changing needs. To date this has focused on what makes the difference for fund performance and how to secure efficient investments.

This issue was profiled in the Sandler report. The author concluded that "the asset allocation choice of any investment is the critical element in determining long run investment performance. For the individual investor with a long term, buy and hold investment style, the asset allocation decision is by the far the most important factor in determining returns."

In another study of 91 pension funds ranging in size from $100m to more than $3bn it was shown that the right choice of asset contributes around 94 per cent to long term performance.

Furthermore, and when considered along side Harry Markowitz's (Nobel Prize winner in Economics 1990) modern portfolio theory in which it was proven that for every level of risk it is possible to construct an investment portfolio that delivers the maximum return. It should be possible to create an efficient investment portfolio.

Unfortunately, this approach is a break with tradition and traditional insurance companies don't offer the range of investment options and do not accurately establish an individual's attitude to risk.

The net effect is therefore some compromise on return as a trade - off for providing such companies with the responsibility for our own pensions. That said, there is hope for change provided as individuals we take greater control of this process and exploit the opportunities provided by new pensions.

* Graham Laverick is MD for WR Financial Management in Teesdale, South Stockton. He can be contacted on (01642) 661600.

Published: 21/10/2003