Useful guides

Retirement Planning

A beginners guide to retirement planning

The sooner you start preparing for your retirement the better. Starting early means you have longer to build up your pension pot.

In this guide, we’ll outline some of the key aspects to consider when you start pension planning.

Key pension and retirement services

The following are the main pension types and services:

Workplace pensions. These involve contributions from you and your employer.
Personal pensions. Also known as private pensions or SIPPs, you make your own contributions and investment choices.
State Pension. This is linked to your National Insurance contributions. The State Pension age is due to increase to 68 between 2037 and 2039.
Pension tax relief. This is a government incentive designed to encourage you to save for retirement. The government tops up the savings you put into your pension.
Accessing your pension. Typically, personal pensions set an age at which you can start accessing your money. Usually, this is not before 55.

What’s the difference between pension saving and retirement planning?

Retirement planning is about preparing for your lifestyle once you’ve stopped working. Pension saving is for your financial future once you have retired, giving you a retirement income, paid by either your employer or pension plan.

Personalisation. This is about ensuring clients have the right information, when they need it, so they can make informed decisions based on their own situation and objectives and sending them to the right place.
Comprehensive planning. Including all relevant considerations, such as frequency of contributions, understanding your pension plan, diversifying investments, regular reviews, planning for inflation and seeking professional advice.
Long-term financial security. Keeping informed and adaptable for achieving long-term retirement goals.

Did you know…

The average retirement age is 65 years for men and 64 years for women in the UK.

How to get started with pension and retirement planning

Assess your current pension situation

To check that you are putting enough away, work out your anticipated retirement needs by:

Estimating how much you’re going to require by thinking about your ideal lifestyle in retirement, expenses you expect to incur and taking any extra income sources into consideration
Evaluating your current savings by looking through your pension statement. This will tell you how much you’ve accrued to date
Comparing this information with your retirement goals to see if you’re on track
Using online tools, like pension calculators. These are useful for projecting your future savings. And then check this aligns with your retirement needs

Set clear retirement goals

This is important because:

You can future-proof your retirement
It provides financial security
And gives you peace of mind
It can mean substantial tax advantages
It offers independence and flexibility in your later years
It also provides the opportunity to contemplate your legacy so you can make plans for transferring your assets to future generations

Understand your pension options

To be able to make key choices on your pension options, you need to understand them. With various different schemes available, to get the most out of your pension, it’s crucial you make the choices that are most suitable for you, your current financial circumstances and your retirement goals.

There are two main pension types. They are: defined benefit and defined contribution. Defined benefit schemes offer a set income for your retirement based on your salary and years of service in employment. Defined contribution schemes are dependent on the contributions made by you and your employer.

Knowing the differences between the two options should help you make more informed choices about your pension.

It is also prudent to consider factors like your current age, age you’d like to retire, financial goals and career plans. By assessing these kinds of things, you should find it easier to decide what type of pension plan is going to be most effective for you.

Seek professional advice

There are many benefits to be gained by speaking with a retirement planning professional, including:

A wealth management professional will have a deep understanding of pension planning and management. It is well known that the pensions arena is a complex one. It can be confusing and worrisome trying to understand and navigate legislation and changes to pension rules, but with professional guidance from an experienced pensions adviser, you can relax, knowing that you are getting the most from your pension arrangements.
Pension regulations are difficult to follow and keep up to date on. When you add the intricacies of tax law and government policies, it can seem overwhelming and be hard to follow. For that reason, people of all ages choose to work with a pension specialist. They will be able to talk you through contribution limits and beneficiary designations, and so much more. A good wealth manager will be fully aware of the latest changes in the pension sector and will ensure you comply with the law while maximising your retirement strategy.
Professionals will be able to help you navigate your savings and investment strategies. They will work with you to establish the most suitable options for you based on your financial goals and risk tolerance.
They will be managing your retirement plan while you focus on your career or personal life.
They will also have access to financial analysis software, retirement calculators and other resources which will help them manage your plans.
And they’ll be well-connected with other professionals, such as solicitors, for example.
They can help you with complex financial matters, help you get the most from multiple income streams and ensure you don’t pay unnecessary taxes.

Create a long-term plan

When creating your plan, start with knowing your financial goals, then look at how you are going to accomplish them. Establish income sources and estimate potential future expenses. From there, develop a savings strategy and focus on asset and risk management.

Image showing a man writing in a notebook

Understanding pension options at retirement

As you reach retirement, you will need to make some choices on how you manage and access your money:

Annuities

A pension annuity offers a guaranteed income during retirement. It involves an agreement between an individual and an insurance company. The individual often contributes a lump sum payment or regular premiums to the insurer in return for regular payments.

Drawdown pensions

Drawdown pensions are also known as pension drawdown or flexi-access drawdown. They enable withdrawals from an individual’s pension pot while ensuring the remaining funds continue to be invested. You are able to start accessing your pension savings from the age of 55 (57 from 2028). You can typically withdraw up to 25% tax-free. There is flexibility in how and when you take your pension, allowing you to take lump sums or regular withdrawals from your pension pot.

Lump sum withdrawals

Lump sum withdrawals mean that in a single tax year you can access your entire balance, or a set amount, typically 25% of the full amount (depending on your providers rules), from your pension plan.

Combining pension options

You are able to transfer a defined contribution pension to another pension provider and consolidate your pensions pots. There are several potential benefits to doing this:

Less paperwork. Combining pensions can make it easier to keep track of your savings.
Lesser charges. Moving your savings to a cheaper scheme can boost your pension value in the long term.
Greater control. If you are confident in making your own investment choices and have the time to manage them, consolidating your pension savings into a Self-Invested Personal Pension (SIPP) can offer you access to a broader range of investment options.

Factors to consider when choosing

When selecting a pension plan, it’s important to compare various details such as contribution limits, annual fees, and account management options. Consider the investment strategy, focusing on the plan’s risk management approach and historical performance.

With a workplace pension, your employer will typically select the provider. However, with a private pension, this decision will be yours so you can opt for the one that feels the most suitable.

It makes sense to compare pension providers. To do this, you can take a look at online reviews and ensure that those you’re considering are authorised and regulated by the Financial Conduct Authority (FCA).

Call: 0115 795 0423
Email: wealthadvice@jlwm.co.uk

FAQs

Can I have a pension plan and retirement savings?

Yes, it is possible. It’s prudent to have a combination of both for a financially secure retirement. They each provide guaranteed income, flexibility, and control over funds.

Is there a limit on the amount of pension tax relief I can get?

Yes, the government sets a cap on the total amount you can contribute to all your pensions while still enjoying tax relief. This limit, known as the pensions annual allowance, is currently set at £60,000 per year or 100% of your earnings, whichever is the lower amount. The limit does include tax relief and employer contributions.

Do I have to retire at a certain age? If so, what is it?

There is no fixed age at which you must retire in the UK. You are free to work for as long as you want to. Though, most of us would like to stop working at some point.

Additional resources

We have a number of wealth management resources you can browse:

If you can’t find what you’re looking for or would like to discuss your pension and retirement planning in more detail, contact our helpful team today.

Let's talk wealth management

Insights

About us