The Financial Services Authority (FSA) and the Association of British Insurers (ABI) are to launch a pension calculator to help the third of people who research has found may face financial difficulties in retirement.

The pension calculator, which will be available on the website, aims to help people to gauge their retirement income, and follows the FSA's announcement that 31 per cent of people may hit financial problems when they enter retirement.

The research by the regulatory body looks at unemployment, bereavement and household status' effects on levels of financial capability.

The calculator will be available on the Moneymadeclear website, and allows anyone with a pension fund from a previous employer, a new pension scheme, or those without any pension at all to calculate their potential retirement income based upon regular payments. The calculator will feature further functions in the future.

Chris Pond, FSA director of financial capability, said: "For many people, pensions are not something they want to think about until retirement is imminent and by then they may find their pension falls far short of the lifestyle they had hoped for. So it's important to do as much as possible to make the most of your money by considering all the choices available. The pension calculator can help you identify the implications of your pension choices and impact on later income to determine if you are on the right track."

Maggie Craig, ABI director of life and savings, added that the new online calculator is an "invaluable tool for anyone who wants to engage with planning for retirement, and you can't be too young to start that process. As 'defined contribution' pensions, particularly those available through the workplace, become increasingly popular, the pension calculator will help people to plan for how much they need to save in order to be financial comfortable in retirement."

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