Reviewing your pension

If you're close to retiring, it's time to start considering the practicalities. Whether you’re 10 years, five years or 12 months away, our countdown can help you get ready for life ahead.

Understanding what you need to consider

You might yet not have decided when you want to retire. Ideally, you should start giving your financial plans serious thought.

While many people choose to work for as long as they can, or at the very least work on reduced hours, others would prefer to take early retirement.

You might be planning to take advantage of the recent changes to pension rules. These say you can access your savings from age 55, rising to 57 in 2028 (future rises will be linked to changes in state pension age).

Nothing has to be set in stone, but it might be time to start planning a rough date for when you want to retire. That way you can make sure your pension and other savings are positioned in the right way.

If you’re around 10 years away from when you want to retire, it’s a good idea to review your pensions and savings to make sure you’re on track for the kind of retirement you want.

Ask yourself if you are saving enough. If you want to be able to have a comfortable income in retirement, it pays to put away as much as you can into you pension and other savings now. If you have a workplace pension and your employer matches your contributions, it’s worth checking if you are making the most of this valuable benefit.

Look at how much you have built up so far in your pension fund and other savings, like ISAs, and whether this might be enough to let you live the kind of lifestyle you want in retirement. Financial advice could really help.

You might want to ask whether your pension is currently invested in the right way. The majority of savers end up in a default investment fund from their pension provider. You may feel it’s appropriate to take more – or less – risk with your savings depending on how close you are to retirement.

As you get closer to your chosen retirement date, you should start thinking in more depth about what you want from retirement and making more detailed plans about how you might achieve it.

You should review your savings and investments to make sure that your money is working hard enough for you to achieve the retirement you desire. Speaking to a financial adviser could make a considerable difference.

It’s essential to review your pension fund. You may want to consider increasing your pension contributions now, to give yourself a larger pension pot to retire on.

If you have a partner it’s worth sitting down with them to discuss what you each want out of retirement, so you can work closely together on building a lifestyle where you are both happy.

You should think about whether you have an up-to-date Will, and other financial considerations, such as whether you would like to be able to financially support loved ones, or if you have any debts you’d ideally like to pay off before retirement (such as a mortgage).

Calculate your current living expenses, including big one-off costs that might only occur once a year, and then consider what will change when you stop working, such as reduced travel expenses. This will provide you with a good idea on how much income you will require in retirement.

If your budget reveals a potential gap between your spending and your likely retirement income, you need to look for ways to fill this gap.

It’s time to consider how you plan to fund your retirement and the income you will live on. It is really important you review your pension fund once again and take financial advice on your options, particularly when it comes to turning your pension fund into an income.

Financial advice will take into account your personal circumstances and give you a recommendation tailored to your unique circumstances.

Decide what to do with your pension fund, including whether you are going to take some or all of it as a lump sum (up to 25% of it can be taken tax-free) for immediate use.

Finally, there is your State Pension. The State Pension age is currently is 65 for men. For women, it will reach 65 by November 2018 and will then rise to 66 for both men and women by October 2020 and 67 by October 2028, before rising further in future years.

You don’t start to receive the State Pension automatically – you have to claim it. You should get a letter four months before you reach state pension age, telling you what to do.

Our recommendations are likely to include stock market-linked investments. These aren’t like building society savings accounts, as your capital is at risk and you may get back less than you invest. The value of your investments and any income from them may fall as well as rise.

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