You’re on the brink of retirement! After years of hard work and saving, it’s exciting to think about the next chapter. But with the demands of work and family, retirement planning can sometimes take a back seat in our busy lives. But now is the perfect time to refocus your energy. You may well be on track with your plans. If not, don’t panic, there’s still plenty of time to make adjustments.
Here’s a simple 10-point checklist to help you prepare for a happy retirement.
1. Aim to be debt-free
As you look ahead to retirement, it’s wise to focus on becoming debt-free if you can. With just ten years to go, reducing any existing debts will mean less of your retirement income is spent on interest payments. This is the ideal time to prioritise paying off high-interest debts like personal loans and credit card balances. If you have low-interest debts, such as a mortgage, you might choose to manage that over time during your retirement if the terms are reasonable. Imagine how freeing it’ll feel to step into retirement without the burden of debt.
2. Find any missing pension pots
Did you know that the average UK worker holds about 11 jobs over their lifetime? This can lead to multiple pensions with various providers, making it easy to lose track of them. If you’ve moved homes or changed jobs, you might not even remember where all your pensions are. You can use the government’s free Pension Tracing Service to help you track them down. By entering basic information about your previous employers, you can find the contact details of your pension providers. You’ll need to reach out to each one individually to check the value of your pots and update your contact information.
3. Consolidate your old pensions
Once you’ve tracked down your missing pension pots, consider consolidating them into a single plan. Planning for retirement can be difficult when your pensions are scattered across various providers. It can make simple tasks - such as seeing the total value of your pension pot or how much you’re paying in fees - unnecessarily complicated. A simple solution is to combine your pensions into one online plan. Having your pensions in one place could make them easier to manage and help you to make more informed choices when it comes to saving for retirement.
4. Review your pension investments
As you get closer to retirement, it’s important to reassess your pension investments. When you’re younger, your pension contributions may be invested more in company shares (equities) for growth. These investments are usually higher risk as they fluctuate with stock market movements and other changes in the economy. With 10 years until retirement, it’s often wise to shift towards lower risk investments like bonds (fixed-income). This strategy can help shield your savings from market fluctuations as you approach retirement. Many pension schemes offer a ‘default fund‘ where your savings are automatically adjusted to lower-risk investments as you get closer to retirement. But it’s worth checking how your fund operates to ensure it aligns with your retirement goals.
5. Assess your financial position
Now that you have a clearer idea of your pensions, it’s time to assess your overall financial position. Think about what income you’ll need in retirement and where that income will come from. Your income from pensions - across any workplace pensions, personal pensions and the State Pension - is only one piece of the puzzle. You may have savings accounts, like a Stocks and Shares ISA, or even income from a business or rental property.
6. Use a Pension Calculator
Consider using a pension calculator to check your progress. This handy tool estimates your projected retirement income based on factors like how much you’re saving and how many years you have left until retirement. With our Pension Calculator you can set a retirement goal and see if your savings seem to be on track. Don’t forget about the State Pension, which depends on your National Insurance (NI) contributions and qualifying years. You can visit gov.uk to check your NI contribution record. Just answer a few straightforward questions to find out how much State Pension you could get, when you can claim it and how you could increase it.
7. Top-up your pension savings
Are you on track to meet your income goals? If you are, that’s great news! Just remember to stay consistent and avoid becoming complacent. If you’re not on track, it might be time to increase your contributions to cover any shortfalls. But don’t worry, you still have time to turn things around. As you progress further along in your career, your earnings may be at their peak, allowing you to contribute more to your pension. Plus, if your expenses have decreased - perhaps your kids have grown up and your mortgage is nearly paid off - you may find you have extra funds to stash away into your pension.
8. Explore your retirement income options
When the time comes to retire, depending what type of pension you have, you can usually choose what to do with your pension. This might include taking out a lump sum when you turn 55 (rising to 57 from 2028) or buying an annuity. You could just decide to leave it invested and take regular drawdowns as your income. It’s vital to think carefully about which option suits your needs, as this is a significant decision that can impact your financial future. If you’re uncertain, it could be beneficial to discuss your choices with a qualified Independent Financial Adviser (IFA) who can provide personalised guidance.
9. Write a will and nominate beneficiaries
Have you thought about your estate? In the UK, your ‘estate’ is the value of all your financial holdings, including: cash, debts, investments, and property. This is used to calculate the amount of Inheritance Tax (IHT) that’s payable by your beneficiaries. These are the people you’d like to inherit your estate and they’re usually named in your will. But, pensions usually sit outside of your estate and, in most cases, won’t count towards your IHT threshold when you die. But, this is set to change in 2027. You can nominate your pension beneficiaries with your pension provider.
If you’re a PensionBee customer, you can easily add beneficiaries by heading to the ‘Account’ section of your BeeHive. Simply fill in some details about your chosen people or charities (or a combination) who you’d like to receive a portion of your pension when you die. You can spread it across different beneficiaries and customise the proportion of your pension that goes to each, in the form of a percentage. It’s important to regularly review your nominations and keep them up to date. Once we have been notified of your passing, we will begin our review of any death benefits payable from your plan with a view to identifying and agreeing on final beneficiaries as quickly as we can.
10. Book a free Pension Wise appointment
Finally, if you’re still feeling uncertain about your retirement plans, consider booking a free appointment with Pension Wise, a service from MoneyHelper, once you turn 50. This government service is designed to help you understand your options as you approach retirement. The best part? The appointment is completely free and impartial, giving you the chance to ask any questions you may have without any pressure.
If you’re aged under 50, the MoneyHelper website provides a wealth of useful information related to pensions and broader financial matters.
Summary
The 10 years before your retirement provide a great opportunity to review your finances, check your progress and make any adjustments necessary. Here’s a reminder of the 10-point checklist:
- aim to be debt-free;
- find any missing pension pots;
- consider consolidating any old pensions;
- review your pension investments;
- assess your financial position;
- use a Pension Calculator to track your progress;
- top-up your pension savings if you can;
- explore your retirement income options;
- write a will and nominate beneficiaries; and
- book a free Pension Wise appointment.
Risk warning
As always with investments, your capital is at risk. The value of your investment can go down as well as up, and you may get back less than you invest. This information should not be regarded as financial advice.
