Retirement checklist

Greater flexibility around how you use your pension savings, may open up exciting new possibilities for your future. Our checklist can help you ensure your planning is on track. Are you retirement-ready?

There are now three ways that you can access your pension savings.

When you reach age 55, if you have a 'defined contribution' pension, you can take your money as cash or, as a guaranteed income with an annuity or flexible income through a flexi-access drawdown plan. You can also opt for a combination of options depending on your provider – or leave your pension pot where it is if you don’t need it just yet.

Each option is subject to Income Tax, and the amount you pay will be based on your circumstances and your tax situation at the time you take your pension savings. The good thing is that you can normally take the first 25% or your money tax-free.  So before you decide which option is right for you, check to see what the tax implications are.

If you are a member of an 'occupational pension scheme' or have a 'defined benefit' pension, the options available to you may vary, so please check with your provider.

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Your pension, your freedom

You can now access your pension in more ways than ever before, after the government introduced wide-ranging changes in April 2015.

This is great for you and your retirement. You just need to decide which option is best for you. We’ve put together this video, to help you along the way.

Having trouble playing our video? Please view here.

How can I take my pension savings?

It might seem like a far off prospect but knowing how you can access your pension pot can help you understand how best to build for the future you want.

The key thing to know is that from the age of 55, if you have a defined contribution pension, you have the freedom to choose how you take your pension.

There are several ways you can take your pension.

There are several ways you can take your pension.

Lots of choice can often mean increased confusion, so here’s an at-a-glance view of your options. We’re not recommending one over the other, but we can support you when the time comes to make your decision.

(For a more in-depth view of each of the options, with examples and numbers, you can also explore our Approaching retirement section.)

When considering how you’ll take your pension, think ahead about how much you might need to live on in retirement - and how you’ll make your money last.

With all of the options, you can normally take up to 25% of your pension pot as a tax-free lump sum if you wish to do so. The rest will be taxed as an income as and when you receive it, so look at the tax implications of each option carefully.

So what are your options?

1. Get a secure, regular income for life with an annuity
 
If you want to use your pension to provide a guaranteed regular income for life, you can buy an annuity with your fund.

There are different types of annuity to choose from, with income options to suit your needs, perhaps those of your partner when you die - or maybe an increased income if you or your partner have certain health conditions. Check out these annuity tips before you buy.

2. Get a flexible income with a flexi-access drawdown plan

Drawdown lets you dip into your pot as you need. You simply take flexible cash amounts from your pension pot, while the rest stays invested.

But like any investment, the value could go down as well as up and you may not get back what you put in. Any money you have left in the fund can be passed on when you die.

3. Take your money as cash

You can do this all in one go, or as a series of smaller lump sums, whilst the rest remains in your pension fund.
 
If you opt for smaller lump sums without taking your tax-free cash up front then each payment will be 25% tax-free. The remainder will be added to your income for the year and taxed accordingly.

This may result in you paying a higher rate of tax.

4. A combination of options

It may be possible to mix and match what you do with your pension pot at different points in your retirement.
 
Before combining any options though, take time to think about the benefits and considerations of each option on its own. Check with your providers to see that you’re not losing out on any guarantees on your plan by combining options.

5. Leave it where it is

If you don’t need the money just yet, you could leave it invested for now. As long as your money stays in your pension pot you won’t pay tax on it and you’ll get tax-relief on contributions you make into your plan.

There’s no guarantee you’ll get more when you take your money out, as your fund value can go down as well as up while it remains invested, and so you may not get back what you put in.

You should check with your provider to find out about charges and penalties.

Some other things to think about

We recommend you use Pension Wise, a free impartial guidance service from the government to help you understand your options at retirement.  You can find out more on their website or by calling 0800 280 8880 to book a telephone or face-to-face appointment.

When deciding what to do with your pension pot you should be aware that different providers offer different products that may be more suited to your individual circumstances. Each product option could also have different tax implications. Their rates, investment funds, charges and terms may also be different.
 
For example, with an annuity they might use different criteria to assess you or your partner’s health and/or lifestyle conditions, this is often called an enhanced annuity. This might mean that you could get you a higher level of income elsewhere.
 
This is why it’s important to shop around - so that whatever you decide to do, it’s the right decision for you.

If you are a member of an occupational pension scheme, the options available to you may vary, so please contact your scheme administrator.  If you have a pension with guaranteed benefits where the value is £30,000 or more, legislation requires you to take financial advice when looking to convert into a flexible option.

In addition, if you want to transfer out of a defined benefit scheme you are also required to take financial advice.

Now that you have more choice over how and when you access your pension; check to see how much you could get from each of the options. If you are aged 55-85, our new Retirement Income Calculator will provide an example of what you could get. Results are based on your age, pension pot size today, generic rates and current tax information. What you actually receive will depend on circumstances at the time you come to take it. 

If you’re an existing customer, it’s best to contact us and we can talk you through your options and what your pension pot could provide based on our rates. 

We also have a range of other online tools to help with your planning, and products for when the time comes.

Modern retirement takes many forms, with more of us continuing to work later on in life or on a part-time basis. Is phasing your retirement an option that you’ve considered? Perhaps you’d like to start your own business – or perhaps it’s a necessity to ensure you can live how you’d like when you retire fully. Would the basic State Pension and any other investments you may have, such as your home or other pensions, fund your current lifestyle, for instance? Don’t forget to also factor in inflation, which could affect the buying power of your money in the future.

As well as changing your working habits, you should consider how events that could happen after you retire could impact on your finances. No one likes to think about ill health or long-term care, but getting prepared early will ensure you have a plan in place should you need it.  Your children or even grandchildren may also need some financial help – maybe it’s with education, or getting on the property ladder – or even a wedding.

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Life events that can influence your retirement income needs

When considering your income needs, it's a good idea to think about the types of events that could happen after you retire that may impact your budget. Thinking about these things early might help you when you're deciding the best way to take your pension savings.

Working habits

Although you may have retired from full-time employment, perhaps you may wish to earn money from part-time work. Besides the State Pension, consider any other income sources you'll have when you finish working full-time and find out when they kick in. 

Supporting your family 

Perhaps you have children or grandchildren that you plan to help through further education. How will you provide this financial support once you've retired? Some people intend to help their children onto the property ladder; have you made a plan for how you'll afford this? 

Health 

Leading a healthy lifestyle can help ensure you'll be fighting fit during your retirement. However ill health can strike at any time. And although you may not like to think about it, it's important to factor things like medical costs into your financial planning.

In the longer-term, you may also need to pay for residential care for yourself, your partner, or your parents. 

Savings & property

The amount you have in savings may influence what you'll need from your pension. Is this enough to live on? 

If you own a home, you may have decided that you'll sell your home and move somewhere that better suits your lifestyle needs. You'll also need to think about how you would pay for a new property and factor in any repair costs to a new or existing home. 

How you choose to take your pension 

  • The way you choose to take your pension can impact things like your tax position or pension allowances. 
  • If you choose to move provider, you may lose any guarantees that you may have with your existing pension provider. You should also think about the impact of taking any tax-free cash, income or lump sums may have on any means-tested benefits you currently receive. 
  • There may be one-off or on-going charges to manage your money e.g. fees for financial advice or administrative costs for any of your financial products. 

The effects of inflation

The effects of inflation may reduce the buying power of your savings and investments in the future, so think about how you'll maintain your lifestyle if your money doesn't stretch as far.

What's the ideal retirement job for you?

Not everyone wants to let go of their working life when they reach retirement age. 

More than half of people due to retire this year are planning on working past State Pension age.

Many people are planning to keep their careers going. Some are even aiming to start a new career, perhaps as budding entrepreneurs.

The results of our Class of 2017* study found that more than half of people due to retire this year (51%) are planning to work past their State Pension age, or are already doing so.
Of them...

33%

enjoy working

26%

don't like the idea of retiring and being at home

20%

would like to start a new business or earn money from a hobby

So, what are your job options in retirement?

Stick with your current job

You may have hit State Pension age, but that doesn’t mean you have to automatically give up your day job. Just under one in 10 people (9%) surveyed who plan to work past State Pension age would stay full time in their current jobs.

You could also go part time. More than a quarter of people in the study (28%) who aim to work past State Pension age said they would stay in their current job, but reduce their working hours. It’s a chance to gradually shift into retirement mode.

Sign up for voluntary or charitable work    

When working past State Pension age, many people may be motivated by reasons other than money. It can be a chance to have a renewed purpose and stay active in your community. Or it could just be because you may miss the routine. 

Having the chance to help others whilst also keeping yourself active can be rewarding and make you feel like you're contributing to something worthwhile.  

Find out about the wide range of things you can do for good causes

Start your own business    

Retirement can be a time to make your long-held dreams become a reality. That may include starting a new venture. An entrepreneurial one in five (20 per cent) hope to either start a new business or earn some money from a hobby. You could:

  • Follow your passion and try earning money from your hobby.
  • Use the skills from your previous career to make and sell a product or sell your services.
  • Learn a new skill to create a product or service.

Whether you set up your own venture, go part time or volunteer, the big benefit is being able to choose how you fit your new working life around the other exciting things on your retirement ‘life list’ that you’d like to do.

It’s also important to think about your future income. This could be from any pensions and savings, as well as your retirement job. Carefully consider your finances, and even talk to your pension provider, so you can fund your ideal lifestyle – in work and beyond.

*Research Plus conducted an independent online survey for Prudential between 8 and 22 November 2016, among 10,605 non-retired UK adults aged 45+, including 1,000 planning to retire in 2017.

 

 

51%

 

 

would consider working past State Pension Age, according to our Class of 2015 research

 

 

 

 

 

30%

 

 

want to reduce hours with their current employer

 

 

 

 

 

10%

 

 

want part-time work with a new employer

 

 

 

So, what are your options for phasing your retirement? 

Going part-time

Going part time is a great way to carry on earning, whilst also giving you back some time for other pursuits. Nearly a third of those surveyed in the Class of 2015 study would like to reduce the hours they work with their current employer. 

Changing jobs

Changing jobs can be refreshing. It could also enable you to move into a part-time role so you have more time to yourself. Just over 10% of people surveyed would look for a part-time job with a new employer. Would you? 

Delaying retirement altogether

Some people are choosing to delay retirement altogether. Just over 10% of those surveyed said they would carry on full-time in their current job. Over half the people surveyed (51%) would consider working past State Pension Age to help improve their financial position. Would you like to stay in your current role for longer? 

There may be other benefits to continuing in some form of employment too. Over half (57%) of survey respondents would consider staying in work to stay mentally and physically fit. Over a third (39%) enjoy working, and 35% would miss the social side of interacting with colleagues if they weren’t working. 

The opportunities a phased retirement may bring can be exciting. It’s important to gather all of the information you need, including talking to your pension provider, to help ensure it’s the best option financially, as well as for your lifestyle.  

*Research Plus conducted an independent online survey for Prudential between 21 November and 4 December 2014 among 7,687 UK non-retired adults aged 45+, including 1,012 intending to retire in 2015 that feature in the above.

 

 

51%

 

 

would consider working past State Pension Age, according to our Class of 2015 research

 

 

 

 

 

30%

 

 

want to reduce hours with their current employer

 

 

 

 

 

10%

 

 

want part-time work with a new employer

 

 

 

So, what are your options for phasing your retirement? 

Going part-time

Going part time is a great way to carry on earning, whilst also giving you back some time for other pursuits. Nearly a third of those surveyed in the Class of 2015 study would like to reduce the hours they work with their current employer. 

Changing jobs

Changing jobs can be refreshing. It could also enable you to move into a part-time role so you have more time to yourself. Just over 10% of people surveyed would look for a part-time job with a new employer. Would you? 

Delaying retirement altogether

Some people are choosing to delay retirement altogether. Just over 10% of those surveyed said they would carry on full-time in their current job. Over half the people surveyed (51%) would consider working past State Pension Age to help improve their financial position. Would you like to stay in your current role for longer? 

There may be other benefits to continuing in some form of employment too. Over half (57%) of survey respondents would consider staying in work to stay mentally and physically fit. Over a third (39%) enjoy working, and 35% would miss the social side of interacting with colleagues if they weren’t working. 

The opportunities a phased retirement may bring can be exciting. It’s important to gather all of the information you need, including talking to your pension provider, to help ensure it’s the best option financially, as well as for your lifestyle.  

*Research Plus conducted an independent online survey for Prudential between 21 November and 4 December 2014 among 7,687 UK non-retired adults aged 45+, including 1,012 intending to retire in 2015 that feature in the above.

Pensions and living longer

The number of people aged 100, or over, has quadrupled over the past thirty years according to the Office for National Statistics. 

The number of people aged 100, or over, has quadrupled over the past thirty years

While this is good news, the longer you live, the more money you need to fund your lifestyle throughout the whole of your retirement. This has had a big effect on pensions, both state and private.

State Pensions

The income paid out to today's pensioners by the state, is funded by those who are working now. As the proportion of people over State Pension Age grows, the more expensive it gets.

To help counteract this, the government is changing the age at which you can claim State Pension. It is currently 65 for men. State Pension Age for women is gradually increasing from 60 and will reach 65 by November 2018. State Pension Age for both men and women will then increase to 66 by October 2020. The State Pension Age will increase from age 66 to 67 for males and females between 6 April 2026 and 5 April 2028. The government will continue to review state pension age - taking into account all relevant factors including life expectancy, so these ages could change.

You should consider this change as you plan your retirement. A State Pension Age calculator on the Government website will enable you to check your expected State Pension Age.

Individual pensions

Increasing life expectancy has also had a major effect on the amount of income paid out by annuity providers. Because the money saved up by individuals will have to last longer, you'll need to build up a larger pot of money to provide for your retirement, or work longer. It's therefore important to think ahead about how you can make the most of your potential income.

You’ll spend your time in different ways when you’ve retired, and your day-to-day budget and cash needs will likely change, with some costs going up and some coming down.

Because you’ll probably spend more time at home, things like your energy bills are likely to go up. But if you were commuting to work, these costs are likely to come down. You’ll also need to factor in any money that you owe on bills, debts or your mortgage, and ensure you have enough to cover any new hobbies or significant holidays you’d like to take - along with insurance.

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How your spending habits might change

It's no secret that we are generally living longer. And in the UK's major cities, the average time someone thinks they'll spend in retirement is now just over 20 years*. Whilst this means you’ll have more time to enjoy the things you love, it also means you’ll need to plan to ensure your money can last.

Things to think about

Plan to ensure your money can last.
  1. Spending money on your home
    If you’ve paid off your mortgage then your costs will be low. Consider how you’ll pay for upkeep on your home, including repairs, replacements, and improvements. If you’re renting, you need to factor this cost into your budget.
  2. Costs for your children and grandchildren
    If your children are yet to fly the nest, plan on going into higher education, or want to buy a house, you may need to budget to support them. You might want to help your grandchildren too. 
  3. Travel
    You may save money on transport costs, because you won’t be commuting. You might even be eligible for free or discounted public transport. These savings could be put towards other areas of your budget. 
  4. Entitlements
    Remember to check out all the potential help and support you could be entitled to when you reach retirement or certain ages. For example, travel passes, reduced costs at leisure centres and help with your winter fuel bills.

Things you’ll need to plan more carefully once you've retired 

  1. Holidays
    Chances are, you’ll want to travel and take more holidays once you’re retired. What’s on your wish list, and will your budget stretch to cover these trips? It’s also worth factoring in travel insurance, which can be more expensive for over-65s. 
  2. Heating and bills
    Your utility bills could increase if you spend more time at home. Look into the Winter Fuel Payment  - you could be eligible for some tax-free support to help towards your bills. 
  3. Looking ahead to the long term
    We’re living longer now than ever before. Careful planning for things like long-term care for you, your partner or your parents, will help you budget for your whole retirement.

The Money Advice Service have a budget calculator you can use to help you plan more effectively. You can also read our related articles to find out more about budgeting for your retirement. 

*Source – Prudential’s Tale of the Cities retirement research, August 2016 and ONS data: Life expectancy at birth and at age 65 by local areas, released 4 November 2015.

Fixed or flexible income in retirement?

A closer look at annuities and flexi-access drawdown.

With the introduction of pensions freedom you can now take greater control over how you use your pension to fund your retirement. You have the choice of taking your money as cash, or using it to provide a fixed or flexible income via an annuity or a flexi-access drawdown plan. Whilst the cash option allows you to flexibly access your pension as a single or series of cash lump sums, here we'll look at the choices available if you were to turn your pension savings into an income. 

What's right for you may depend on factors such as your health, inflation, tax, or any financial responsibilities.

When considering the income options, what's right for you may depend on factors such as your health, inflation, tax, or any financial responsibilities you have for others. 

Your attitude to risk may also influence your decision. For example, if you prefer the security of knowing that you'll have a fixed income for life that isn't dependant on the performance of another type of investment, then you may feel that an annuity is for you. Alternatively, depending on your individual circumstances, flexi-access drawdown may provide more flexibility with how you access your pension savings. 

The value of your investment can go down as well as up so you might get back less than you put in. If you take more money from the plan than the amount your investment has grown by, the value of your investment will be less than you’ve put in.

So what is an annuity? 

An annuity will provide you with an income for the rest of your life, regardless of how long you live. Although an annuity comes with a guaranteed income in retirement, what you can afford to buy with your money might change over time due to inflation. Inflation is a measure of how the price of goods and services is changing and so could impact the purchasing power of your money over time. There are different types of annuity, some of which are designed to protect against this. 

The options you choose when you buy an annuity could affect what happens to your pension when you die. For example:

  • If you've chosen a guarantee period and die within this period, the annuity will continue to be paid until the end of this time. 
  • If you bought a joint life annuity, payments will continue to the second person at the level you chose, until they die - these payments may be taxed as income at their marginal rate. 
  • In all other cases, when you die, your income payments will stop and any loved ones will not receive an income after your death.

It's important to understand the various options available after you die. Further information on what happens to the annuity can be found at gov.uk.

What is flexi-access drawdown?

Flexi-access drawdown gives you the flexibility to take any number of income payments from your pension savings, once you have transferred them to the drawdown plan, as and when you want to. You maintain control over how you invest your fund. 

Leaving your fund invested in flexi-access drawdown leaves you open to the risk that you could lose money if the funds you've invested in don't perform well and the value goes down. Your flexi-access drawdown pot could also run out if you make excessive withdrawals.

If you die before you turn 75, the death benefits from your pension will usually be free from income tax for your beneficiaries. If you die after reaching age 75 the death benefits are normally taxed as the beneficiaries' income. For more information please visit gov.uk.

The benefits and considerations of buying an annuity or drawdown

An annuity...the benefits

  • Gives you a guaranteed income for life.
  • Guaranteed income for a spouse, partner or a dependant if you select that option.
  • There are level and increasing income options available.

The considerations

  • If you haven't shopped around, your income from your provider may be lower than you could get elsewhere.
  • If you and/or your partner have any certain health and/or lifestyle conditions, you could be entitled to a higher income. Other providers may cover different conditions which means you could get more income elsewhere.
  • Check if your pension plan has any guarantees built into it as this could potentialy enhance your annuity income.
  • Any entitlement you have to any means tested benefits you receive, such as Housing Benefit or Income Support, may be impacted.
  • If you have debts, any creditors could have a claim on any money you receive.
  • Before you purchase an annuity, consider that once taken out, you cannot currently change your mind.

Flexi-access drawdown...the benefits

  • You're in charge of how your money is invested. It is up to you how and when you take your money.
  • If you wanted to, you could purchase an annuity later.
  • Any money you have remaining in your plan when you die can be passed on to your loved ones although there may be tax implications depending on your particular situation. 

The considerations

  • If investment returns are poor and/or a high level of income is taken, the value of your drawdown fund may be significantly reduced. This could result in lower, or no income in the future and you may also not get back what you put in.
  • The risk is your money could run out and you could have to rely on another source of income, for example, the State Pension.
  • If you have a guarantee on your pension plan this may be lost if you take your pension savings as a drawdown income.
  • Any entitlement you have to any means tested benefits you receive, such as Housing Benefit or Income Support, may be impacted.
  • If you have debts, any creditors could have a claim on any money you receive.
  • Before you convert your pension to a drawdown, consider that you may be restricting the amount you can invest into a pension in the future.
  • You may not be able to take a drawdown product without taking advice.

Remember that it doesn't have to be an either-or choice between buying an annuity and keeping your money invested in a flexi-access drawdown plan. You could opt for a mix of the two – purchasing an annuity with some of your pension pot for a guaranteed income and have some invested in flexi-access drawdown, where you can draw an additional income as and when you need it. When you’re deciding what you want to do with your pension pot, you should consider all the options and their tax implications. Pension providers offer different products with different features and options, including the product terms, rates, funds or charges that might be appropriate for your individual needs and circumstances.

That’s why it’s important you shop around. So whatever you decide to do – whether that’s an annuity, drawdown or something else, it’s the right decision for you.

For some products, like annuities, shopping around will help you get the highest possible income. Your health and lifestyle can increase the amount of income you can get. Different providers may use different criteria to assess your health and lifestyle conditions. This is known as an enhanced annuity. Prudential do not offer enhanced annuities but you may qualify for an enhanced annuity with another provider and get a
higher income. That’s why it is very important that you should shop around. 

Be mindful that investment scams exist so it is important to remain vigilant and check the facts before you make any investment decisions, as you could lose money.

We are not recommending a particular retirement option, or course of action, over another.

We recommend you use Pension Wise, a new service from the government which offers free and impartial pensions guidance. This service is available over the internet, over the phone and face to face.

Find out more at pensionwise.gov.uk

If you are a member of an occupational pension scheme, the options available to you may vary, so please contact your scheme provider. If you have a pension with guaranteed benefits where their value is £30,000 or more, legislation requires you to take financial advice when looking to convert into a flexible option, such as taking the pension pot as cash or transferring to a flexible income option.  In addition, if you want to transfer out of a defined benefit scheme you are also required to take financial advice.

You might need to pay tax depending on your circumstances and the options you choose. Tax rules can also change in the future. For more information please visit gov.uk.

Annuity tips before you buy

If you've been paying into a personal pension during your working life, you'll have been building up a pension fund. There are various ways you can access this money from age 55. One of the options is to buy an annuity. This is designed to provide you with an income for the rest of your life, no matter how long you live.

An annuity is a way to ensure you get a guaranteed income in retirement.

You may also have paid into a pension scheme with an employer - if this is the case you'll need to find out how to access this by contacting them directly. Unless you have a final salary (defined benefit) pension scheme where you should automatically receive money as an annuity.

An annuity is a way to ensure you get a guaranteed income in retirement. Choosing an annuity is a big decision, as once selected, you cannot usually change your mind. We've put together some tips to help you work through your options.

Things to think about

  • Fixed or flexible income? Your income options and needs - having an idea of what you want to do in retirement and what your financial needs may be will help you determine if you want a secure and regular income for the rest of your life or more flexibility with your pension savings by being able to access them as and when you want to.
  • What you'll need to buy in future - what you spend your money on in retirement may be different to your current needs. For example, your utility bills may rise if you're spending more time at home. When choosing an annuity option, it's important to consider the effects of inflation as it could reduce the spending power of your income in the future. Also, it's worth knowing it's possible to buy an annuity which increases with inflation, but this will affect your starting income.
  • Compare the market - you can buy an annuity from any provider, so you should shop around, and, depending on your circumstances, you may be able to get a higher income elsewhere.
  • When to buy - if you delay buying your annuity when you retire, you won't necessarily get a higher income in the future because annuity rates can go down as well as up. It may also mean that you are losing out on income that may take longer to recoup than any growth of your fund from leaving it where it is invested.
  • Your health - If you and/or your partner have certain health and/or lifestyle conditions, you could be entitled to a higher income. Different providers may also cover different conditions.
  • The type of annuity you choose - if you want to provide an income for your loved ones after you die you should consider the options such as joint life or adding a guaranteed payment period or you could do both.  
  • The impact on any means tested benefits you receive - Housing Benefit, Income Support, or other benefits might be affected by the annuity you buy.
  • Existing debts - if you have debts, any creditors could have a claim on the money you receive.
  • Check your original pension plan - before looking to buy an annuity on the open market, check what's available under the standard terms of your pension. For example - you may be entitled to a guaranteed annuity rate or guaranteed minimum pension which may may provide a higher income.
  • Consider topping up your pension pots and/or combining your pension funds to buy an annuity - this could give you a higher income when you retire - but the value could still go down as well up whilst it is invested. Combining funds could also impact on any guarantees. 

Getting help to decide what's right for you 

We are not recommending a particular retirement option, or course of action, over another. 

For some products, like annuities, it’s important to shop around so you can get the highest possible income.  Both health and/or lifestyle can increase the amount of income you can get, and it’s important for you to know that different providers may use different criteria to assess your health and/or lifestyle conditions which could result in you getting a higher income. That’s why it's very important that you should shop around.

In addition to the support we offer, we recommend that, from age 50, you seek impartial guidance from Pension Wise, the free new service from the government that is available on the internet, over the phone or face to face. If you are unsure and need advice speak to a financial adviser.

Be mindful that investment scams exist and so it's important to be vigilant and carefully check the facts before deciding what to do with your money.

If you are a member of an occupational pension scheme, the options available to you may vary, so please contact your scheme provider.

Whether you own your home or are renting, you’ll need to consider where you want to live when you retire, and the role your property could play in your future.

Think about whether you plan on moving for a change of lifestyle – or if you may need to downsize or release some equity from your home. Or if you want to make improvements to the property you already have.  

You may also want to make provisions for an elderly parent living with you or for your own long-term care.

Getting older needn't always be a bad thing... 

Depending on your age and where you live, there could be government benefits on top of any State Pension you may get, plus savings on things like healthcare and travel that could really boost your future income.

According to Age UK, billions of pounds in benefits and Pension Credit is going unclaimed by older people each year. Find out what’s available in your local area, and make sure you're not missing out.

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What could you be entitled to in retirement?

Did you know that when you reach State Pension age you no longer pay National Insurance contributions - even if you're still working? Many people don't know this, and along with any State Pension you may get, there may be other financial benefits as you get older too.

According to Age UK, each year up to £3.5bn of Pension Credit and Housing Benefit goes unclaimed by older people. That is money you could be entitled to. In addition, you could save on travel, health costs, and things like days out and going to the cinema. 

Sound good? Get clued up so you don’t miss out.

According to Age UK, each year up to £3.5bn of Pension Credit and Housing Benefit goes unclaimed by older people.

Benefits available from the UK government 

Pension Credit
If you’re aged 65 or over, living in the UK and are on a low income then you may be able to get 'top ups' for the State Pension. That means you get a higher income. Visit the gov.uk website for more information and how to apply.

Housing Benefit
You could get help to pay your rent if you are on a low income. Visit the gov.uk website for further information.

Council Tax reduction
If you are on a low income and your savings are below a certain amount you might be able to get a reduction on your Council Tax. This could be as much as 100% so if you think you might qualify, visit the gov.uk website.

Winter Fuel Payment
You could get between £100 and £300 tax-free to help you pay your heating bills. For more information on your eligibility and how to apply, visit the gov.uk website.

Attendance Allowance
If you're aged 65 or over you could claim Attendance Allowance. This is to help with your care if you have an illness or disability. You can find out more on the gov.uk website.

Cold Weather Payment
If you are getting certain benefits, such as Pension Credit, you may be eligible to claim the Cold Weather Payment. This is to help you during periods of very cold weather between 1 November and 31 March. Visit the gov.uk website for more information.

Personal Independence Payment
You may be able to get help with some of the extra costs caused by long term ill-health or disability. If you think you might qualify, visit the gov.uk website.

Carer's Allowance
If you care for someone for 35 hours or more per week, then you could be entitled to Carer's Allowance. Find out more on the gov.uk website.

Savings on health and travel costs
We've listed the main ways that you could save on health and travel costs. It's a good idea to find out what else is available in your local area too as benefits can vary depending on where you live.

Free prescriptions and eye tests
If you're over 60 years of age then you qualify for free prescriptions and eye tests from the NHS. 

Pension Credit Guarantee Credit
If you receive Pension Credit Guarantee Credit then you qualify for free prescriptions and eye tests, as well as free NHS dental treatment. 

Free bus pass
If you live in England, once you reach the female State Pension age, you could travel for free on local buses.  In Scotland and Wales, you qualify for the free buss pass at age 60. To find out more, visit the gov.uk website.

Senior railcard
For £30 a year (as at May 2018), anyone aged 60 or over can save 1/3 on Standard and First Class rail fares throughout Britain for a year with a Senior Railcard. For more information and to apply, please visit the National Rail website.

Other ways to save
Many museums, cinemas and attractions offer discounted prices for the over 60s, so whether you fancy a trip on the London Eye or watching the latest blockbuster - make sure you look out for concession prices!

Think about whether you’ll need to make provisions for a partner or dependants - both when you retire, and after you’ve gone. This may be for an elderly parent in need of financial support, or a grown up child heading to university or buying their first home.

When it comes to passing your pension on after you die, you can nominate to do this when you are still contributing to your pension plan or at the time you turn this into a guaranteed or flexible income.  If you take your pension savings as cash and have a Will, it will be up to you who you leave any money you have left, to. 

Find out about the options available below, and the varying tax implications depending on whether you are still paying into your pension fund, or if you’re already taking it out as an income. 

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Ways to pass your pension on

The way that you decide to take your pension will affect what you can do with it when you die.

Whilst it’s not always easy to talk about, the way you will eventually pass on your pension has most impact on other people, so it could help to talk with your spouse, children - or other people close to you, when you’re deciding how you take your pension savings.

Pension death benefits

The type of benefits that can be paid (lump sum and/or income options) will depend on the scheme rules and the type of arrangement the benefits are being paid from.

If you have the option to nominate who you want to benefit this may have an impact on the type of death benefits that can be paid.

Tax may be payable on the amount inherited after you die. Further information is available on the gov.uk website.

Annuity death benefits

Rather than have your money die with you, you may have selected a guarantee period or a joint life option, or both, when you set up your annuity. This means ongoing income will be paid to your loved ones for either a set period of time - or for the rest of their lives. 

Serious ill health

If you are under the age of 75 and become seriously ill (you are expected to have less than 12 months to live) you may be able to take your whole pension fund as a tax free lump sum. If you are over the age of 75 in this circumstance you may take any remaining pension as a cash lump sum which will be added to your income and taxed accordingly.

Further information regarding serious ill health and your pension can be found on the gov.uk website.

What happens to your State Pension?

When you die, your husband, wife or civil partner may be entitled to receive some of your State Pension entitlements depending on individual circumstances.

Find out more about inheriting a State Pension from a partner or increasing qualifying years on the gov.uk website

Where to get further information

Each option has its own tax implications, benefits and considerations, which you should take into account before making a decision. You can get more information from the following sources or seek financial advice:

Current rates and allowances can be found on our Tax and Allowances webpage.

Because tax rules can change, the impact of taxation (and any tax relief) depends on your individual circumstances. 

Once you’ve worked out what your pension pot and any other savings, investments, property or entitlements could provide, you’ll be able to look at whether this would help meet your future income requirements and the lifestyle you envisage. It could also influence when you should be able to achievably retire, to try and ensure that you are financially secure. Living longer, with the potential for more time in retirement along with a rising State Pension Age, are all things to consider.

If there is going to be any potential shortfall, topping up your pension in the final years before you retire could make a difference to the amount of money you’ll have to retire with. Alongside this, if you are considering delaying your retirement and continuing to contribute to your pension, the value could still go down while the money is invested and so this will not necessarily mean a larger pot or a higher income when you do come to take it.

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Tips to improve your retirement income

Perhaps you're looking forward to having more time to explore faraway places. Or maybe you dream of simply waking up each day and doing whatever takes your fancy. However you see your future, retirement is a time for you to do the things you've always wanted to do.

Retirement is a time for you to do the things you've always wanted.

The ways that you can take your pension savings changed in April 2015, giving you more choice over how you can access and use the money you've saved up. Deciding what to do with your pension is a big decision. To help you in your planning, here are some tips that could help you increase the money you have available in retirement. 

Make sure you have details for all your pension pots 

  • Locate pension pots that you may have forgotten about. The Pension Advisory Service and the Pension Tracing Service can help you to trace forgotten pension pots.
  • Remember to take your State Pension into account. Find out more about your State Pension, including what you might be entitled to and how to claim, on the gov.uk website. 

Consider topping up your pensions 

  • Think about topping up your pension in the years leading up to your retirement. That little bit extra could make a difference. 
  • Remember, you might be eligible to top up your State Pension too. This could be particularly beneficial if you're self-employed or a woman, because it's possible your State Pension entitlement may be low. 
  • From age 55 you can draw your pension savings as and when you need it and still pay into your pension. You'll continue to receive tax relief on your payments up to age 75, although taking benefits flexibly will limit how much you can put in.  

Consider retiring a little later than you'd originally planned

  • Delaying your retirement might give your pension fund more chance to grow. Remember though, if your pension fund remains invested the value could go down as well up and you may not get back what you put in. If you defer your retirement, it's also important to check whether this will affect any state benefits you're entitled to. 
  • Working part-time for a while after you finish full time work might enable you to delay drawing money from your State Pension or your pension, meaning your money may last longer when you do retire. 
  • Maybe you fancy trying something new, like setting up your own business. Becoming your own boss could be a good way to stay active and keep earning.

As well as deciding what to do with your pension, there are other things to think about when it comes to making sure you have the retirement lifestyle you want. Feel inspired by the possibilities that retirement can bring by watching our new video or try our retirement 'life list' tool, using the related links below.

Delaying when you take your pension

We have an exciting amount of choice in our lives these days. Whether it’s the way we shop, or how we communicate, there’s more freedom over how we do things. This is also true when it comes to how you choose to retire.

And because we're living longer, delaying your retirement might be one way to approach it.  You could take your time and ease into things.

More and more of us are choosing to extend our working-lives.

Perhaps you don’t feel ready to retire yet because you still enjoy your role at work. Or maybe you wouldn’t have enough money to live on if you retired right now, so you want to put a bit more into your pension savings first.

If you're thinking of postponing the original retirement date you selected, one of first things we’d recommend is contacting your plan or scheme provider to talk through your options.

Choosing to phase your retirement 

More and more of us are choosing to extend our working-lives. That could mean leaving full-time employment and going part-time, or trying something new like starting your own business. By continuing to work you may be able to contribute more money into your pension and take advantage of the tax benefits in doing so. That might mean you could have a bigger pot when you do decide to retire completely.

You can delay your State Pension too

Although you can't take your State Pension before your State Pension age, you can delay taking it until a later date. If you do start claiming it at a later date, you'll receive a higher income that is equal to the amount of pension you would have got, plus interest. 

Key things to consider

  1. By delaying when you take your pension, your pension funds may have grown but there’s a chance they might have gone down in value too. It could mean you have less money when you come to take your pension and you may not get back what you put in.
  2. You should check with your pension scheme or provider about any restrictions that may apply for delaying your retirement date, and the process and deadline for telling them.
  3. Find out about whether there are any costs for leaving your pot where it is – there may be an administration fee or ongoing charges for continuing to manage your pension.
  4. If you eventually decide to use your pension savings to provide an income, there is no guarantee you will receive more, or even the same amount as if you were doing so now. For example, annuity rates may have changed.  In addition, the income you lose out by delaying, may outweigh any growth on your fund from leaving it where it is.
  5. There may be guarantees that you could lose, or restrictions or adjustments that are applied to your pension, that you will need to consider if delaying taking your pension beyond the original retirement date.
  6. State benefits that you may be entitled to, may be affected if you delay your retirement date.

If your pension pot exceeds a lifetime allowance you may be subject to a tax charge. You may also have to pay tax when you start taking an income from your pension. Understanding tax rules can be complicated so we’ve prepared a guide to show how this may affect you.

When deciding what to do with your pension pot you should be aware that different providers offer different products that may be more suited to your individual circumstances. Each product option could also have different tax implications. Their rates, investment funds, charges and terms may also be different.

For example, with an annuity they might use different criteria to assess you or your partner’s health and/or lifestyle conditions, this is often called an enhanced annuity. This might mean that you could get a higher level of income elsewhere.

This is why it’s important to shop around - so that whatever you decide to do, it’s the right decision for you.

More information

We are not recommending a particular retirement option, or course of action, over another. There are other options available, which you can read more about using the related links below.

In addition to the support we offer, we recommend that, from age 50, you seek impartial guidance from Pension Wise, the free service from the government that is available on the internet, over the phone or face to face.

Check everything thoroughly with your provider too, as although you no longer have to buy an annuity by your 75th birthday, there may be similar-type rules specific to your plan or pension scheme.

Further information about tax and deferring your State Pension can be found on the www.gov.uk  website. The Pensions Advisory Service can also offer general pension guidance.

Benefits of topping up your individual pension

As you fund an individual pension yourself, the more you pay in, the more potential there is for you to achieve the retirement you want. You could also get tax relief on the additional contributions so it is worth considering topping up your pension.

What difference could it make?

For example, if you are a basic rate taxpayer and you paid in £80 per month to your personal pension, the taxman would add another £20 in tax relief. Over 20 years this would add up to a total pension contribution of £24,000. Broken down, 20 years equals 240 months. So, 240 x £80 = £19,200 in pension contributions and 240 x £20 = £4,800 in tax relief.

And if you earn above the basic rate of tax, you can also claim additional tax relief through your tax self-assessment form. You can also do this online.

Plus you could make an even bigger difference to your pension pot by topping up your contributions, although tax relief is subject to government limits.

If you are a Scottish Rate tax payer, your Personal Allowance is the same as the rest of the UK as well as your rate of income tax. However, the amount you can earn before paying higher rate tax will be £31,500 (totalling £43,000 which includes the £11,500 personal allowance). 

For more details on the Scottish Rate of Income Tax, please visit the https://www.gov.uk/scottish-rate-income-tax

Topping up your pension could boost your income in retirement.

Please remember that the value of your pension fund could go down as well as up and so you may not get back what you put in.

Topping up - the earlier the better

Topping up your pension could boost your income in retirement. But the earlier you start, the more potential your fund has to grow.
 
And if you opt for an automatic premium increase (API), by adding an extra 5% to your premium every year for instance, your fund could have even more potential to grow.

This is for illustration only and is based on our current understanding 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.

Why it could pay to top up your workplace pension

So the great news is you’ve taken the first step, and are already a member of a workplace pension scheme.

This means you’re taking advantage of any contributions your employer makes into your plan. And the more you contribute (within limits), the more your employer may too – so it’s a win-win!

Long-term, this opportunity to receive increased employer contributions could really help shape your future retirement plans.

It's therefore worth having a conversation with your employer to understand their scheme rules about how much they'll contribute if you wish to top-up your regular payments. This may be up to a certain percentage of your salary.

Let's also look at a simple example of how topping up your workplace pension plan could make a difference. 

There are various ways you can boost the benefits of your workplace pension plan.

What difference could it make?

For example if you contributed £100 per month (which includes £20 basic rate tax relief) over 20 years, assuming your employer matched your contributions, this would give you a potential pot of £48,000. Broken down, this means you'd contribute £19,200; the taxman would contribute £4,800; and your employer would contribute £24,000. This would be more if you earn above the basic rate of tax.

In addition to this, the more you've paid into your workplace pension plan, the more the taxman may provide in tax relief, subject to government limits.

You can also use this free workplace pension calculator to help see the effect of contributions into a workplace pension plan.

Please remember that the value of your pension fund could go down as well as up and so you may not get back what you put in.

How do I top up my workplace pension?

There are various ways you can boost the benefits of your workplace pension plan (to find out more refer to the key features of your own workplace scheme).

  • Speak to your employer about topping up your workplace pension.
  • You can supplement your contributions through an additional voluntary contributions (AVC) plan, although your employer may not match any contributions through this. This is an individual policy that aims to boost the benefits of your workplace scheme. You can see the benefits of contributing to an AVC plan with our AVC calculator.
  • You can set up an individual pension arrangement to supplement your company pension.
  • If you are unsure speak to a financial adviser.  

This is for illustration only and is based on our current understanding 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.

Choosing what to do with your pension savings is one of the most important decisions you are likely to make. It's therefore a good idea to access all of the support available to you, to help you with this decision. We recommend that from age 50, you use 'Pension Wise'; a service available from the government that offers free and impartial guidance to help you along the way. Find out how to access this by visiting www.pensionwise.gov.uk or call 0300 330 1001 to book an appointment. This service is available on the internet, over the telephone or face to face at a Citizens Advice branch.

You may also like to contact a financial adviser.

Whatever you decide to do with your pension, you should shop around for the best income and options to suit your circumstances. The Money Advice Service provide information on how to do this. Our timeline below can also help with your retirement planning whether you’re 10 years or two weeks out. 

So what are you waiting for? It’s time to start preparing for your future.

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Retirement planning - no time like the present

The very concept of retirement is changing. ‘Phased retirement’ is becoming more common; the way we access our pension is now a lot more flexible, and it’s no secret that in the UK we’re living longer than ever before. A longer retirement and more choice over how you take your pension make for an exciting time. And planning ahead will help ensure you’re on track to a financially secure future. Our timeline will help you get started. 

10 years before you plan to retire

Although retirement can still seem a while away, begin to consider what you want your life to be like when you get there.  Here are some things to think about as you start to build your plan: 

  • The age you’d like to retire. 
  • How much you’ll likely have in your pension fund/s - and the income you’ll need when you retire. 
  • Any savings, investments or other assets that you could add to your retirement income.
  • How your living expenses could change in the future.
  • How you’ll pay for any travel, hobbies or further education once you’ve retired.
  • An emergency savings fund, to help with any unexpected costs like car or home repairs.
  • Paying off any debts before you retire.
  • How you’ll support your dependants once you’ve retired.
  • Putting money aside to pay for long-term care for you, your partner, or other dependants.

Don’t forget that your spending habits are likely to change in retirement. For example your commute costs are likely to be lower, but more time at home may mean your utility bills go up. A budget calculator can help you work out your outgoings and you can also find out more about your changing income needs within the ‘related content’ below. 

Planning ahead will help ensure you're on track to a financially secure future

Five years before you plan to retire

Now is the time to make sure your goals are on track:

  • Decide the age you’re likely to retire.
  • Consider phasing your retirement, and continuing to work part-time for your current or a new employer.
  • Boost your pension by increasing your contributions and/or adding lump sum payments (take advantage of any unused pension tax allowance).
  • Trace any lost pensions through the Pension Tracing Service.
  • Ask for up-to-date statements for all your pensions. You can also get a forecast of your State Pension at www.gov.uk.
  • Look over your investments and savings to see if they still meet your attitude to risk as you get closer to retirement.
  • Think about whether you’d like to take an income from your pension or whether you want a pot of cash, including any tax free allowance, to do something different in retirement.
  • Discuss your options with a financial adviser, if you have one.  You could also talk to family and friends.
  • If you’re 50 or over you can also access free and impartial guidance from Pension Wise. This service is available on the internet, over the telephone or face-to-face.
  • Write a Will or review your existing Will - and plan what will happen to your pension and estate if you die plus any tax implications.

Six months to go

It’s time to give yourself a retirement-readiness check-up:

  • Review your pension statements to get an accurate picture of what your funds are worth.
  • Make an appointment with your financial adviser for advice on the best retirement options for you.
  • Determine the best option/s for taking your pension savings to meet your financial and lifestyle needs.
  • Tell your pension providers you’re planning to retire, so that they can send you any and all information you need in plenty of time.
  • Update your beneficiary information.
  • Set a date for a pre-retirement meeting with your employer.
  • Let the taxman know you’re retiring because your change of status will affect your tax code.
  • Budget for changes in your day-to-day spending after you retire.

Twelve to eight weeks before

It’s down to business now - you’re just outside of your selected retirement date:

  • Speak with a financial adviser to consider your options and retirement plans.
  • Ask your provider about the ways you can access your pension based on the options available.
  • Re-discuss your options with an adviser, family and friends - and those who’ve already retired.
  • You should get a letter four months before you reach State Pension Age, telling you how to claim your State Pension. If you haven’t received this by three months before, here’s how to claim this
  • Look into any entitlements from the government over and above any State Pension you may get, as these could make a real difference to your living costs.
  • Don’t forget to access Pension Wise for further impartial guidance.

Eight to two weeks before

The final countdown! It’s time to make sure you have all the information you need to help make a decision:

  • Consider any retirement quotes that your provider may have sent you. 
  • Remember, if you want to use your pension to provide an income, you should shop around the different providers to get the best income you can. If you and/or your partner have a health and/or lifestyle condition then you could get an even higher income as different providers also cover different conditions.  More information on how to shop around can be found on the Money Advice Service website.
  • You'll also need to apply to your provider/s if you're moving pensions from different sources.
  • There you have it; happy retiring!