What happens when I get near retirement?

It's always important to make sure you are on track to receive the income you'd like when you retire but as you near retirement you might consider making the following checks.

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.
• You could use our Retirement Calculator to find out how much income you may get in retirement and how you might increase it.

Nearing retirement

As you're nearing the normal retirement age you might start considering the points below.

State pension

The government will automatically start paying you your state pension at your state retirement age and you should receive forms to fill out a few months before. If this does not happen you should check with The Pensions Service.

Individual and company pensions

You may want to turn your pension into an annuity, a taxable income for life, but there are many options to think about.

Some options to consider

• Taking early retirement - check with the scheme to see whether you can take early retirement (the minimum age is 50 although this is rising to 55 from 6 April 2010). Although bear in mind that this will reduce any benefits.
• Deferring your pension - you may want to wait before buying an annuity (although you must buy one by 75). Doing this does not necessarily mean you'll get a better annuity rate.
• Shopping around for the best annuity rate - you do not have to buy your annuity with the same pension provider. You can choose another provider if you wish, this is called the Open Market Option.
• Tax-free lump sum - you can take 25% of your pension fund as a tax free lump sum but you must do this when you buy your annuity.
• Income drawdown - you can leave your money invested and draw an income from it.
• Small pension pot - if all your pension savings total £17,500 or less and you're aged between 60 and 75 you may be able to take all of it as a partly taxable cash lump sum.
• Choosing an annuity - if you have a partner, you might buy a joint-life annuity, which ensures an income continues to be paid after you die.
• If you and/or your partner (if you choose a joint-life annuity) have an illness, condition or lifestyle habit that may shorten your life expectancy, such as smoking, you may qualify for an enhanced or impaired life annuity. This normally pays a higher income.
• Combining pensions - if you have more than one pension you may wish to combine them to maximise your annuity 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.

Six to three months before

Contact your provider - some providers may contact you first but you can get a head start by checking with your pension provider to see how long things will take to buy an annuity and to get a valuation - although this may change by the time you retire.

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 annuity scenarios.
• Consider your options, perhaps talking it over with family and friends.

Eight to two weeks before

• You should receive an annuity quotation pack from your provider.
• You'll need to apply to your provider(s) if you're moving pensions from different sources.
• You should have most of the information you need to make a decision.

Once you make a decision and buy an annuity it normally takes a few weeks for your fund to be converted into an income and for you to receive your first payment.

*This is based on our current understanding, as at 6 April 2009, 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.