What does your retirement look like?


So, you’re in a workplace scheme. Job done? Not quite. Retirement may seem like a long way off but life’s longest holiday takes a bit of planning. After all, you want plenty of “spending money” to enjoy yourself and that “holiday break” could last longer than you think. 

Life expectancy has improved dramatically in the last few decades and many people will now live much longer than you might have expected. According to the Office for National Statistics, a 65-year-old man in the UK will live for an average of 18.5 years, while a woman of the same age can expect to live for 20.9 years*. 

Living longer and healthier lives is great news, but it makes planning for your retirement ever more important. Luckily, preparing for the future can be a straightforward task and there is lots of help available.

To create a plan, start by asking yourself:

  • When do I want to retire?
  • What income do I want?
  • Can I afford to retire?

Your retirement date

In 2015, the government made changes to the way you can take your pension, known as 'pension freedoms'. You can now take cash from your pension any time from age 55, and you no longer need to retire at 65. You can usually work for as long as you wish and phase retirement in when it suits you. 

Could these changes affect your preferred retirement age? Perhaps you’d like to take some of your money sooner, or work part-time while taking some pension income? The good news is, the flexibility of the new rules mean that you have many more retirement options than ever before.

Can you afford it?

The first thing to do is to calculate your total retirement income, including all your private or workplace pension pots. The schemes should send you these details regularly – if they don’t, contact them to ask for a statement, or use the government’s pension tracing service to locate lost pots.

At this stage, you may want to consider combining pots, which could help you save on charges and keep your finances in order. You should be comfortable with the investment choices that you make as you may lose features, protections, guarantees or other benefits when you transfer. If you’re not sure, you should get financial advice - there may be a charge for this.

Next, use the state pension calculator to find out when you can start collecting your state pension and how much you could receive.

Include in your total calculations any income you may receive from other sources such as investments, rent, interest on bank deposits and potential funds from downsizing. It’s also important that there might be other things that you would like to do with this money too, for instance, leaving an inheritance for your children or social care, should you need it down the line. 

Think carefully about how long your retirement could be and how much income you’ll need. Account for health and lifestyle factors, and changes to personal circumstances.

Our retirement planner can help you plan your expenditure and show how much income your total pot could bring. Budget carefully as people often overestimate how much income they’ll need, and how much income their savings will provide. It’s important not to underestimate the length of your retirement.

If there is a shortfall, you might need to save more now. The planner can also show you how doing this now can make a difference to income you’ll need later on. 

Remember, a financial adviser will be able to help with investing your pension savings in the right way, and at the right level of risk for you.

Want to know your options? We can help

The retirement planner explains your options in detail. You can start taking pension benefits when you're 55 as:

  • A tax-free lump sum, up to 25%
  • Flexible regular income with a drawdown pension
  • Guaranteed regular income with an annuity and or a drawdown pension with a secure income feature
  • A combination of these options

Alternatively, if you are some time away from retirement, you can wait and decide later. The key thing is that your savings are there for you when you need them. 

Please note that not all options are available under all plans and any contract with a guaranteed minimum pension or guaranteed annuity option carries restrictions.

Our retirement planner explains all these options, with your potential income from each, and ultimately helps you create your own retirement plan. Once you decide which option to take, select it from the list on the planner and follow the steps to apply.

This information is based on our understanding of current taxation law and HMRC practice, which may change.

How do you decide what’s right for you

Choosing the right retirement option for you isn’t something you have to do alone. To help you decide, there's a range of advice and guidance services available, including:

  • An independent financial adviser
  • A restricted adviser – these advisers often specialise in one particular area, such as pensions
  • The government’s PensionWise guidance service
  • Another guidance service, such as Aegon Assist. These services can help you to understand your pension options, including all the tax implications. However, they cannot recommend any products or actions or give advice.

Don’t delay – the sooner you follow these simple steps, the better your chances are of achieving the retirement you want.

Finding out what you’ve got in total is essential to forming a plan for the future.  Your workplace pension scheme will provide you with the basics, but it’s important that you make the most of all your savings to make sure the retirement you want, is the retirement you get. 

* National life tables, UK: 2013–2015, p.2