Retirement planning

Making retirement planning simple

Retirement planning is all about working out how much to save now, so you can live how you want later. Words like ‘pension annuity’ and ‘drawdown’ can seem bewildering, but we’re committed to making it as easy as possible.

As part of our mission to get the UK ready for retirement, we want to help everyone understand how the process works and what their options are. There are two parts to it - our infographic explains more and you can read on below.

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graphic illustrating considerations for retirement planning

Saving for retirement

This can be done through a personal pension, workplace pension and/or ISA, or through a General Investment Account (GIA), offshore bond or guaranteed solution.

Personal pensions and workplace pensions are generally considered to be two of the best ways to save for retirement. Workplace pensions offer the potential of regular contributions from your employer, meaning extra payments for you.

The value of an investment can fall as well as rise and isn’t guaranteed. You could get back less than you originally invested.

ISAs can be used alongside or as an alternative to a pension. There are limits to how much you can pay in each year though and the tax benefits work in different ways from pensions.

The value of an ISA will be directly linked to the performance of the funds selected and may fall as well as rise. You may get back less than you invested. An investment in a stocks and shares ISA will not provide the same security of capital associated with a cash ISA. The favourable tax treatment of ISAs may not be maintained in the future and is subject to changes in legislation.

If you’ve already made the most of the main tax-efficient savings products such as pensions and ISAs but have more to save, General Investment Accounts and offshore bonds are other tax-efficient options.

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More about the ISA More about the ISA

Living off your retirement savings

There’s lots of flexibility about when and how you retire these days. Here are some of the ways you can access your money saved in a pension:

Drawdown -  you decide how much income you take and how and when you want to take it. You can also change the amounts and how often you receive the money throughout your retirement. This option gave you the option to leave a lump sum that you can pass on to a beneficiary when you die – but only if you haven’t used up all the money in your pension pot.

Pension annuities - provide you with a guaranteed income for life. You choose the level of annuity, how often you want to receive your money which will continue to stay this way until you die.

You could also choose to take out some or all of your cash as a lump sum. In most circumstances up to 25% of this will be tax free. The rest will be taxed at your marginal rate.

It may be that you want to have a mix of the options above to suit your retirement needs. That’s ok because you can split your pension pot up to help provide this.

To find out more about the options available to you visit Your Retirement Planner(Opens new window)(Opens new window)(Opens new window)

Now you have a better understanding of the different options, get your Retiready score now to see how prepared you are.

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If you need more support, Pension Wise(Opens new window) is a free and impartial service that helps you understand your pension options.