Get started by using these planning tips to help you feel more confident about life after work.
Planning for retirement can feel complex and overwhelming. How long will your savings have to last and what sort of lifestyle would you like to enjoy? There is a lot to consider so it can be hard to feel confident that you’ve got the right plans in place. We want to help keep things simple. So we’ve broken down some key steps you can take to help you prepare, one step at a time.
Step one: Think about when you want to retire
Do you have a retirement age in mind?
It will help to know when you’ll be entitled to claim your State Pension, as that forms part of most people’s retirement plans.
Be sure to check if the retirement age you have in mind is the one on your pension plans and update this if it is different.
Your retirement date may seem like an unimportant detail, but the age you have on your plan can affect investment choices the nearer you get to it. And remember if you’ve moved jobs a few times you may have more than one pension to keep up to date.
Also bear in mind that the age at which you can access money from your pension plan is currently 55, but this is due to rise to 57 from 2028.
Being clear about your retirement age and then working out the size of the savings pot you’ll need before you’ll be comfortable leaving work behind can be really motivating.
Step two: Get to know your retirement options
Deciding how you plan to take your pension money is a key part of any retirement plan.
If you’re getting close to retirement, it’s time to start investigating how to make the best use of the savings in your pension pot. Will you take out your money in lump sums? Will you leave money invested during your retirement and take it flexibly as and when you need it (also known as drawdown)? If you do that, what will you invest in? Will you convert it into a guaranteed income for life (sometimes called an annuity)?
Step three: Work out how much you might need in retirement
What sort of retirement lifestyle would you like to enjoy? Will your mortgage and other debts be paid off? Do you plan to travel and spend some of your hard-earned savings? How much money do you need to retire?
The answers to these and many other questions are very important when it comes to working out what you’ll need by way of an income every year. They’re also worth discussing with whoever you plan to spend your retirement with.
They’ll tell you how much you might need to fund a minimum, moderate or comfortable lifestyle – whether that’s as a couple or a single person.
Step four: Understand the bigger picture
When you have an idea of the kind of lifestyle you’d like and the income you’d need to pay for that, the next step is to see whether your savings can support this.
Starting with your pension pot, you will need an accurate picture of where you are right now. Most pension plans let you check online any time how much you’ve got and if your savings are on track.
At most, the State Pension will give you just over £10,600 a year. This would mean you need roughly £13,000 more a year if you were aiming for the ‘moderate’ lifestyle outlined above. So this is where your personal and workplace pension plans and any other retirement income sources like ISAs or other investments come in.
And don’t forget to take into account other income options you might have from things like part-time work, rental income or other savings.
Step five: Track down lost pots
Could you have a ‘lost’ pension? If you had a previous job (or jobs) that came with a pension plan, then there could be a pot of pension money waiting for you. Tracking down and combining your pots could help give you a clearer picture of how much you currently have in pension savings.
Transferring other pension plans may not be right for everyone, you’ll need to consider all the facts and decide if it’s right for you. You could lose money by giving up any guarantees or benefits you might get from your other pension plans. There’s also no guarantee that you’ll get more as a result of transferring.
Disclaimer
The information here is based on our understanding in September 2023 and shouldn’t be taken as financial advice.
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