PENSION investment is undoubtedly the best way to prepare for retirement and reduce your annual tax bill. But underfunding is a major problem, especially among the self-employed, or people who have joined occupational schemes late in their working life.

The Norwich Union claims to have taken some of the `mystique' out of the pensions business with the introduction of an `underfundometer', a sort of pensions slide ruler which allows you to select the income you would like to have when you retire and then shows you the size of the investment fund needed to achieve it. You then compare the two figures with your existing arrangements.

For example, if you fancy retiring today with an income of £35,000 you will need a pension fund worth £344,556. What about £20,000? You'll still need to have built up £196,889 to enjoy that modest income.

The underfundometer doesn't tell you how much you need to put away to achieve a fund of £344,556 and retirement income of £35,000, but any good broker will happily provide that information. But Family Money's 1996 pension survey showed that £30,000 contributed over the last 15 years would buy a pension fund of about £106,000 (and an income of just over £10,000 a year.)

As the recent ESRI report on pensions showed, the average self-employed pension fund contribution was just over £2,200 a year, but this modest sum is invested by fewer than one in five of all self-employed people. The Norwich Union's underfundometer may have been intended to encourage higher funding, but for most self-employed people the very concept of it will probably come as a complete revelation.

Underfundometers are available from brokers and independent financial advisers.