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What happens when I get near retirement?

What happens when I get near retirement?

It's a good idea to keep an eye on your pension savings as well as your finances, to see if you are on track to receive the income you'd like in retirement. Here's some things to think about as you get closer to that time, and for when the time comes.

Five years before

You might consider taking a look at your investments and pensions around five years before you plan to retire.

  • You could check with you pension provider to see how your pensions are doing.
  • Check any investments to see how they have performed.
  • You might think about topping up any pensions or investments if you can.
  • You could speak to a financial adviser to see how to make the most of your finances.
  • From age 50, you can now access free impartial guidance via the Pension Wise service to help you understand new pension options introduced by the government in April 2015. This service is available on the internet, over the telephone or face to face.

Nearing retirement

When you near the normal retirement age you might start considering the points below.

State pension

The government will start paying you your state pension at your state retirement age and you should receive forms to fill out a few months before. You can find out what to do if you are not contacted on the Directgov website.

Individual and company pensions

Many people turn their pension into an annuity (a taxable income for life) but there are other options to think about.

Some options to consider

  • Taking early retirement - check with the scheme to see whether you can take early retirement and the impact this might have (the minimum age is 55).
  • Shopping around for the best annuity rate - You should shop around and, depending on the choices you make, you may be able to get a higher income elsewhere if you decide to use your pension to provide an income. More information on how to shop around can be found on the Money Advice Service website.
  • Tax-free cash: you can usually take up to 25% of your pension savings tax free (depending on the your plan/scheme rules). The remainder of your benefits will be taxed.
  • How you take your pension savings - you can now take your pension as a single or series of cash lump sums; or as an income via a drawdown plan or an annuity. See more on the pension changes introduced by the government in April 2015.
  • If you choose to take your pension savings as an annuity, you may be entitled to a higher retirement income for certain medical conditions.
  • Combining pensions - if you have more than one pension you may wish to combine them to maximise potential. Not all schemes allow this and you may need to ask them. You may want to speak to a financial adviser before combining any pensions as there may be an impact in doing so, and it may not be in your best interests.

Six to three months before

  • It's a good idea to read your recent pension correspondence from your provider, and you may wish to get in touch with them and/or a financial adviser to discuss your options.
  • You may wish to refer to our retire ready checklist and potential entitlements when the time comes.

Ten to eight weeks before

  • Speak with a financial adviser to consider your options and retirement plans.
  • Ask your provider for a number of different scenarios.
  • Consider your options, perhaps talking it over with family and friends.
  • Don't forget to access Pension Wise.

Eight to two weeks before

  • Consider any retirement quotes that your provider may have sent you. Remember you should shop around and, depending on the choices you make, you may be able to get a higher income elsewhere if you decide to use your pension to provide an income. More information on how to shop around can be found on the Money Advice Service website.
  • You'll need to apply to your provider(s) if you're moving pensions from different sources.
  • You'll have received the information you need to help make a decision.

Take action

This is based on our current understanding, as at March 2015, of current tax legislation and HM Revenue & Customs practice, both of which may change without notice. The impact of taxation (and any tax relief) depends on individual circumstances.