Retirement planning: how to plan for your retirement

Why is retirement planning important?

Planning for retirement in the UK is vital as it gives you the opportunity to build the retirement you want and enjoy your golden years.

When it comes to retirement planning, you need to think about how you envision your retired life before seeking help with financial planning.

For example, do you want to move to a new area? Go on many holidays? Or even enjoy a lot of evenings out?

All of these cost money, and working out how you would like to spend your time can help you figure out how much income you’ll ideally need. This is even more important if you hope toretire early.

Now is the time to think big and put all your ideas on the table – deciding what’s possible comes later.

Once you have an ideal retirement in mind, talk to a financial adviser to work out how much income you need and how much flexibility there is with your goals.

Learn more: what's the difference between a financial adviser and a financial planner? 

When should you start planning for retirement?

There’s no set age when you should start planning for your retirement, but the earlier you start, the better. If you know what you want when you retire, it’ll be clearer how much money you need.

How to plan for retirement in your 20s

While you may not have a solid idea of what you want in later life when you’re in your 20s, there are a lot of things you can do to help build the foundations for your retirement.

For example, make sure you’re auto-enrolled in a pension and – if you can afford to – contribute more than the minimum. Some employers may boost their contribution if you increase yours.

If you’re self-employed, you can set up a personal pension to help kickstart your savings for later life. And if you have any debts, it’s a good idea to clear these.

How to plan for retirement in your 30s

Once you’re in your 30s, the priority should be maintaining or increasing pension contributions, which can be tricky if you’re starting a family, buying your own home or getting married.

You should also make sure you don’t miss out on national insurance (NI) credits if you’re eligible.  

Reviewing your pensions is worthwhile – are you getting decent returns and taking the right amount of risk?

If you’re younger, you can invest in higher-risk assets and have time to ride out any volatility.

If you have a few pension pots, you may want to consider pension consolidation and making sure all your contact details are up to date.

Learn more: should you consolidate your pensions? The pros and cons

How to plan for retirement in your 40s

In your 40s, you should seriously start to assess your forecast retirement income and whether it’ll meet your needs, as well as what you want from your retirement if you haven’t already.

For example, what’s your state pension forecast? How much are you expected to have in your pensions when you retire?

Seeing a shortfall in your expected income? If you haven’t already, consider boosting your pension contributions or reviewing them, as well as coming up with a plan.

How to plan for retirement in your 50s

You can access some personal pensions from the age of 55, but it’s worth getting financial advice beforehand. Unbiased can connect you to an FCA-regulated adviser.

Your pension provider may use ‘lifestyling’ to automatically switch your pension savings into a lower-risk fund as you get closer to your retirement age.

If you need financial advice and have a defined contribution pension, the pensions advice allowance allows you to withdraw up to £500, which you can do three times - but you can only do this once each tax year.

Don’t know when you want to retire yet? Now’s the time to decide and revisit your forecast pension income, what you want your retirement to look like and to consider other costly commitments.

Finally, in your 60s, you’ll have access to the state pension, which you can top up before accessing it.

You should have a good idea of when you want to stop working, clear any debts and have a plan for accessing your pension, which you’ll pay tax on.

It’s worth getting financial advice so you can access your pension in the most tax-efficient way. 

How do you decide when to retire?

There is no default retirement age in the UK, so you can work as long as you like (or need to).

However, it’s a good idea to know when you can access your personal and state pensions, as this can impact your planned retirement date. 

If you have a defined contribution pension, you can usually access it from the age of 55, which is set to rise to 57 from 6 April 2028.

With a defined benefit pension, you will typically be paid a guaranteed income, usually from at least 60 or 65, so it’s worth checking with your pension provider.

The state pension age is currently 66 and will rise to 67 between 2026 and 2028, so it's essential to factor this into your retirement planning.

If you’re considering accessing your pensions from the age of 55, it’s worth stressing that your funds need to last your whole retirement, so it might be worth delaying accessing them if possible.

Flexible access to your pension makes it easier to retire gradually by cutting your hours. Continuing to work part-time may mean you save more of your pension for later or keep contributing to it.

And finally, find out your state pension age and when you will start receiving your state pension.

If you retire before reaching state pension age, you will have to make sure you have enough money. 

How to work out your retirement income

Now it’s time to predict your likely income in retirement to see how it measures up to your needs.

So, it’s worth:

• Working out your state pension income by getting a forecast statement from the government website. As this is based on your national insurance record, check for gaps in contributions and top up if you have to, as this can affect how much state pension and benefits you get.
• Track down your pensions – if you’re missing any, you can use the government’s pension tracing service. You will have to choose whether to combine them or keep them separate.
• If you have a defined benefit pension, find out how much you’ll get when you reach your retirement age.
• You should also check how much is in your defined contribution pension and how much you’re forecast to have when you retire.
• Next, review how much money you have in savings accounts and investments. Can you use this for retirement or is this earmarked for other things?
• Finally, consider any other income you might have from part-time work or other assets such as property. Find out more about predicting your retirement income.

You can estimate your income from your pensions using Unbiased’s calculator.

A financial adviser can help you build a plan for your retirement, including how to best access your pensions and make your money last longer. 

Will your income meet your needs?

Think again about your retirement goals and preferred lifestyle, and the likely cost of these. Is the cost more or less than your predicted income in retirement?

If less, that’s great news – it means you should be able to afford your preferred retirement.

But if you think you’ll need more income, then talk to your adviser about ways to maximise your retirement savings – such as topping up your pension. 

When can I draw my pension?

Another thing to think about in advance is when and how you draw your pension.

If you have a defined contribution pension, you can usually access it from the age of 55, although this is set to rise to 57 from 2028.

The state pension age is currently 66 and will rise to 67 between 2026 and 2028, so it's essential to factor this into your retirement planning.

When you’re working out your essential income, it’s wise to use guaranteed sources of income such as an annuity, state pension or a defined benefit pension.

There are other ways to generate income without accessing your pension, such as part-time work, accessing savings, or rental income.

Once you figure out how you’ll get income, you must decide on how to draw income from your pension.

There are several different ways to draw money from your pension, including:

An annuity

This is an insurance product that will pay you a guaranteed regular income for life or a set period of time.

You can take up to 25% of your pension pot as tax-free cash and use the rest for an annuity, which is taxed as earnings.

Drawdown

By using drawdown, you can access your pension pot directly by making flexible withdrawals and keeping the rest invested.

You can take up to 25% of your pot tax-free, while 75% is taxable.

Withdrawing a lump sum

If you withdraw a lump sum, 25% of the money in your pension can be taken tax-free, but 75% is taxable.

Multiple lump sum withdrawals

This is when you withdraw a series of lump sums. 25% of each withdrawal is tax-free (the remaining 75% is taxable).

It is possible to combine different methods to achieve the balance that suits you.

A financial adviser can be helpful by making sure you withdraw the right amount in a tax-efficient way. 

What you need to do near retirement age

As you get nearer to your retirement age, there are a few companies you need to speak to.

Firstly, chat through your plans with your employer. It will give them the chance to offer you an alternative, or let you know how the process works with the company.

You’ll also need to contact HMRC as your tax code should change when you retire.

And you need to get in touch with the Department for Work and Pensions to inform them of if, and when, you are going to start drawing your state pension.

As you’ll be planning for a long retirement, now is a good time to update your will and your expression of wish on your pension, as they are not covered by wills. 

What to do after retirement

Hopefully, your retirement will mark the beginning of many new experiences.

But remember it is not a single event, but a whole period of your life made up of different stages.

You will therefore want to continue looking ahead and updating your plans as you go.

Find out more about later life planning. 

Final thoughts on planning for your retirement

Planning for your retirement is one of the most important aspects of financial planning.

From saving for the future to deciding how much money you’ll be able to draw on, it’s never too early to start thinking about what life after work should look like.

Unfortunately, retirement doesn’t spring out of the ground.

A comfortable retirement requires much saving and planning to make sure that you’re able to do everything you want to do when you finish working.

Planning ahead lets you set aside enough money to do the things you care most about, and it’s never too early to get started.

Get expert financial advice

Planning for retirement is one of the most important steps to ensure your future financial security and peace of mind.

By starting early and regularly reviewing your pension contributions, savings, and investments, you can build a retirement plan that aligns with your goals and lifestyle.

Whether you're in your 20s or approaching retirement age, it's crucial to stay informed, make adjustments, and seek professional advice when necessary.

Remember, a well-planned retirement not only allows you to enjoy your golden years but also gives you the confidence to face the future with financial stability.

Let Unbiased quickly match you with a financial adviser for expert financial advice to help you navigate your retirement planning, maximise your savings, and ensure your income meets your needs.