What are your Retirement plans?
The earlier you start planning, the easier it will be to create the retirement lifestyle you want. For most of us, the State Pension will not provide adequate funding in retirement to maintain the lifestyles we have become accustomed to during our working lives.
Work out what you have
There are lots of different places where you might get an income for your retirement. You’ll need to know what they are and how much you have so you can plan ahead effectively.
Here are a few:
For their current value, or estimates of what they might be worth, just speak to your pension plan providers. If you can’t find details of a scheme you had in an old job, the Pension Tracing Service can help
These are plans you set up yourself, so to get their value, just speak to the pension provider that looks after them. If you think you may have lost track of a plan, try the Unclaimed Asset Register. If the plan was contracted-out then HMRC may also have a record.
Many people see their home as part of their retirement savings, for example downsizing and equity release. If you are considering this, make sure you take into account the costs of moving home and the implications if you want to leave something to your loved ones.
You might have ISAs, stocks and shares, premium bonds, bank accounts or other savings. Even if they’re not specifically ‘for retirement’, keep them in mind, so your plan is fully inclusive.
When you’re planning your retirement it’s important to understand the options for taking income from your pension pot.
What is a pension pot
Your pension pot is the total amount of pension contributions you and/or your employer have made to save for your retirement. Your pot also includes any capital growth earned from the fund’s investments, depending on how your scheme was set up.
Your pension pot doesn’t include your State Pension which is provided by the government.
Your fund should send you a pension statement once a year that tells you how much your pension pot is worth, or there may be an option to check this on their website.
How can you use your pension pot
You must have reached a certain minimum pension age set by your pension fund provider to access your pension pot – usually 55 years.
You may be able to withdraw your pension earlier if you’re retiring because of poor health or disability, but the rules depend on your pension scheme.
You have the freedom to choose how you use each of your pension pots, based on what best suits your needs. Each option comes with its own set of rules, fees, benefits, risks and tax issues.
Deciding what to do with your pension pot can be complicated – there are many factors to consider and financial terms to understand. Talking to a financial adviser can help you understand these rules and tax implications.
Not all pension schemes and providers will offer every option. Talk to your pension fund provider to find out what’s available. Your options may include:
- doing nothing – leave your money invested in your pension scheme
- withdrawing some or all of your pension pot as a cash lump sum
- buying an annuity
- investing part or all of your pension onto the stock market (income drawdown)
- a mix of these options, depending on the size of your pension pot.
Learn more about Retirement planning
Our website offers information about investing and saving, but not personal advice. If you’re not sure which investments are right for you, please request advice, for example from our financial advisers. If you decide to invest, remember that investments can go up and down in value, so you could get back less than you put in.