Three things to think about when planning for retirement

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Planning for life after work? Here are three things to consider as you approach retirement – and even after you’ve started taking your money.

1) Think about…your retirement options

There are a few different ways you can take money from a pension plan. And it’s important to get familiar with them so you can decide which one or ones are right for you. Don’t forget, not every option is available with every provider or pension product. And the option(s) that's right for you may not be right for everyone – it comes down to individual circumstances.

• You can use the money in your plan to buy an annuity, which gives you a guaranteed income for the rest of your life
• You can opt for drawdown (a “flexible income”), which means you can either take regular amounts from your plan – for example, the same amount every month – or just withdraw money as and when you want to
• You can take lump sums from your plan or even all your money in one go

You can usually take up to 25% of your plan tax free. But the maximum you can take tax free in total across all of your plans is currently £268,275, unless you have particular protections in place.

It’s usually possible to choose a combination of different options. For example, you might’ve already started taking your money via drawdown – but, further down the line, you could decide you’d like to use what’s left in your plan to buy an annuity.

The options that are right for you will depend on your circumstances. If you want to find out more about your options, you can read How can you take money from a pension plan?

Oh, and don’t forget that when you take more than that tax-free entitlement we just talked about, you’ll usually need to pay income tax on the rest. So it’s also worth finding how you can be as tax-efficient as possible when you take your money. You can read more in our article.

2) Think about…your investments

When money is paid into a pension plan, it gets invested. So if you’ve still got money in your plan, it’s worth regularly reviewing your pension investments to make sure they’re right for you. 

Some people like to choose their own investments from a range of available fund options. Others feel more comfortable being in a ‘ready-made’ investment option where an investment manager does the work for them (you might see some ready-made options being referred to as ‘lifestyle profiles’). 

If you have the work done for you as part of a lifestyle profile, the investment manager will usually gradually move your money into lower-risk investments for you as you get nearer to your chosen retirement date. Why? Well, the closer you are to taking your money out, the less time your pension plan has got to potentially recover from dips in the market. The investment managers may also prepare your money for retirement according to how you’ve said you want to take your pension savings.

If you've started taking your money but have left some invested, now could be a good time to check if you're happy with your investments and level of risk, keeping in mind that your money has less time to recover from market dips. 

You might not need to make any changes to your investments. But whether you’ve selected your own investment options or you’ve got some help, it’s still important to check in on your investments and make sure they line up with your goals. For more information about checking and choosing pension investments, you can read our article.

Just remember, making changes to your investments has an impact on how much you could get in retirement. So it’s important to think carefully before making any decisions.  If you’re unsure, you may want to consider getting advice from a financial adviser.

3) Think about…finding help and support

OK, we’ve talked a little bit about your retirement options and reviewing your investments.

And if you want to know more, you can see what support your pension provider has to offer. For example, at Standard Life, we offer free retirement webinars. They're online, so you’ll be able to join from your own home if that works best for you. Plus, you’ll have the opportunity to put your retirement-planning questions to a live panel of experts. The webinars can also help you understand where to get further support. You can find out more on our website.

And keep in mind that Pension Wise, a service from MoneyHelper, offers free impartial guidance to over-50s about their options for taking their pension savings. 

 

The information here is based on our understanding in July 2024 and shouldn’t be taken as financial advice.

A pension is an investment. Its value can go down as well as up and could be worth less than was paid in.

Your own personal circumstances, including where you live in the UK, will have an impact on the tax you pay. Laws and tax rules may change in the future.

Standard Life accepts no responsibility for information in external websites. These are provided for general information.