How to plan for retirement with a pension
Learn how to plan for retirement with a pension, how a pension works, and how to get the most out of it.

Table of Contents
- How to plan for retirement with a pension
- How much do you need to retire?
- When to start preparing for retirement
- What is a pension?
- How to get the most out of your pension in retirement
- How do I plan for retirement at different ages?
- How to check how much you’re saving into your pension pot and how much your retirement income could be
- How to boost your pension savings
- What are some of the risks when planning for retirement?
- Get advice from a financial adviser
- FAQs
How to plan for retirement with a pension
If you haven’t begun planning for retirement with a pension, it’s not too late. Most people will get a state pension from the Government, but this will only cover your basic needs. If you plan on having a similar lifestyle in retirement to the one you enjoy now, it’s a good idea to save into a pension fund to boost your retirement income.
In this article, we’ll explore how to plan for retirement with a pension, how a pension works, and how to get the most out of it.
How much do you need to retire?
The amount of money you need to retire will depend on your individual circumstances and what you want in your retirement, such as your lifestyle, health, and desired retirement age.
The recently updated Retirement Living Standards – from the Pensions and Lifetime Savings Association (PLSA) – can give you an idea of how much annual income you’ll need in retirement.
These standards suggest three different tiers of lifestyle in retirement, each one outlining how much money you will need to achieve a particular ‘level’ of lifestyle:
- Minimum – £12,800 a year (single), £19,900 (couple). This covers all your basic needs with a small amount left over for weekends away, gifting, short breaks etc.
- Moderate – £23,300 a year (single), £34,000 (couple). This offers more financial security with some money left over for an enjoyable retirement.
- Comfortable – £37,300 a year (single), £54,500 (couple). This ensures a comfortable retirement with financial freedom including room for luxuries.
Please note: These figures shouldn’t be taken as advice; they’re suggestions based on research by Loughborough University.
When to start preparing for retirement
No matter your age or financial situation, the best time to start preparing for retirement is as early as possible. This will give you more time to save and invest and reduce the amount of money you need to save each month.
Saving a small amount each month can make a big difference over time.
So, to get an idea of where to start, think about what you’ll want to spend your money on in retirement. With this in mind, you can plan how much money you need to save in preparation. To help you further, there are a number of different online calculators that can help you to estimate your retirement income needs.
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What is a pension?
A pension is a retirement savings scheme that allows you to save money tax-efficiently. Several different pension funds are available, each with its own advantages and disadvantages.
State Pension
The State Pension is a government-provided pension paid to all eligible people when they reach State Pension age. The current State Pension age is 66 for both men and women, but it’s set to rise to 67 by 2028. This means if you were born in or after 1960, you will need to work until you’re 67 to receive your full State Pension.
To be eligible for the full State Pension, you need to have paid 35 years of National Insurance contributions. If you have paid less than 35 years of contributions, you may still be entitled to a partial State Pension.
The full State Pension is currently £185.15 per week. To find out more about your eligibility for a State Pension, you can check your National Insurance record to get an idea of how much State Pension you can expect to receive and when you can start drawing it.
Workplace pensions
Workplace pensions are offered by employers to their employees. They can be a valuable source of retirement income. There are two main types of workplace pension schemes:
- Defined benefit pension pot: Defined benefit pensions guarantee you a certain level of income in retirement based on your salary and years of service.
- Defined contribution pension pot: Most workplace pensions are defined contribution pensions. Defined contribution pensions do not guarantee you a certain level of income in retirement. With a defined contribution pension, your income in retirement will depend on how much money you’ve saved and how well your investments have performed.
Personal pensions
Personal pensions are an individual, private pension scheme you can set up yourself. They can be a good option if you’re self-employed or if you don’t have a workplace pension.
Again, there are two main types of personal pensions:
- Self-invested personal pensions (SIPPs): SIPPs give you a lot of flexibility in how you invest your pension savings. However, they can be more expensive than other types of pensions, and they are not suitable for everyone.
- Personal pensions: Personal pensions are simpler and cheaper than SIPPs, but they offer less flexibility.
Other pension options
There are a number of other pension options available, including annuities.
An annuity is a financial product that provides you with a guaranteed income for life. Annuities can be a good option for people who want to guarantee their retirement income. However, they can be complex and inflexible due to the intricate rules and lack of flexibility in modifying payout options.
Choosing the right pension for you
The best pension for you will depend on your individual circumstances and needs. It’s important to consider your age, income, risk tolerance, and retirement goals when choosing a pension. Two points to bear in mind:
- Compare different pension providers. Compare the fees, charges, and investment options offered by different pension providers before you choose a pension.
- Read the small print. Before you sign up for any pension, ALWAYS read the small print carefully. This will help you understand the terms and conditions of the pension.
If you aren’t sure which pension is right for you, you may want to speak to a financial adviser who can help you assess your needs and choose a pension that is right for you.
How to get the most out of your pension in retirement
Retirement is a time to enjoy your golden years, but it’s important to make sure you have the financial resources to support your lifestyle. One of the most important decisions you’ll make in retirement is how to access your pension.
The three main ways to access your pension savings in retirement are lump sum, drawdown and an annuity.
Lump sum
This is what it sounds like, you take all of your pension savings in one go. 25% of it would be tax-free, but you’d have to pay income tax on the remaining 75%.
Pension drawdown
Drawdown is the most common way to access your pension in retirement. It allows you to take an income from your pension pot as and when you need it. You can choose to take a fixed income or a variable income, depending on your needs. Bear in mind you’ll need to pay income tax on the money you withdraw, but you’re still entitled to your 25% tax-free amount.
To draw down your pension, you’ll need to contact your pension provider and request a drawdown facility. They will then send you a drawdown statement, which will show you how much money you have in your pension pot and how much you can withdraw each year.
Annuity
An annuity is a type of pension product that provides you with a guaranteed income for life. When you purchase an annuity, you exchange your pension pot for a regular income that will continue for as long as you live or for as long as you choose (fixed-term annuities).
Annuities can be a good option if you want a guaranteed income in retirement. However, they can be complex and expensive, so getting professional advice is important before purchasing one.
The best way for you to access your pension savings in retirement will depend on your individual circumstances. It’s important to seek financial advice before making any decisions.
How do I plan for retirement at different ages?
Whether you’re in your 20s or your 60s, there are steps you can take to prepare for retirement. With a little planning, you’ll have enough money to live comfortably when you stop working.
Life stage investment planning is a way of investing that takes into account your age, risk tolerance, and financial goals. Bear in mind as you get older, you may need to adjust your investment strategy to reduce your risk and protect your savings.
Planning for retirement in your 20s
In your 20s, you should start thinking about retirement planning. This is because the earlier you start saving, the more time your money has to grow.
- Open a pension: If you have a workplace pension, start contributing as much as you can. If you don’t have a workplace pension, you can open a personal pension, even if it’s just a small amount you save each month.
- Set financial goals: What do you want to achieve in retirement? Do you want to travel the world? Buy a new house? Do more volunteer work? Once you know what you want to achieve, you can start to work out how much money you need to save.
- Create a budget: This will help you to track your income and expenses and to see where you can cut back.
- Pay off debt: Debt can reduce your disposable income and make it more difficult to save for retirement.
Planning for retirement in your 40s
In your 40s, you should start reviewing your retirement plan regularly. This is because your circumstances may have changed since you first started planning for retirement.
- Review your retirement plan regularly: Make sure it is still on track and aligned with your current circumstances. If you haven’t saved since your twenties, you may need to increase your contributions or consider switching to a higher-risk investment strategy.
- Consider your retirement income needs: How much money do you think you’ll need to live comfortably in retirement?
- Make sure you have enough life insurance: Life insurance can help protect your loved ones financially if you die before retirement.
- Start thinking about your legacy: What do you want to leave behind for your loved ones?
Planning for retirement in your 60s and beyond
In your 60s and beyond, you should focus on enjoying your retirement. However, monitoring your finances and ensuring you’re on track to meet your retirement goals is still important.
- Enjoy your retirement! You’ve worked hard all your life, and now it’s time to relax and enjoy your retirement years.
- Continue to monitor your finances. Make sure you’re on track to meet your retirement goals. Now is not the time to realise you’ve made a mistake with your financial planning.
- Rebalance your investment portfolio. You may want to rebalance your investment portfolio to become more conservative as you get closer to retirement to reduce the chance of your savings plummeting when you’re so close to accessing them.
How to check how much you’re saving into your pension pot and how much your retirement income could be
Checking how much you’re saving into your pension is an important step in retirement planning. It can help you track your progress and ensure that you’re on track to meet your retirement goals.
There are a few different ways to check how much you’re saving into your pension, and the best method for you will depend on your individual circumstances:
- Your pension provider: Your pension provider will send you an annual pension statement which shows you how much you’ve saved into your pension and how it’s invested. You can also often check your pension online or over the phone.
- Your employer: If you have a workplace pension, your employer will be able to tell you how much you’re saving each month and how much your employer is contributing. Your employer is legally required to contribute at least 3% of your salary to your workplace pension if you’re saving at least 5%. However, depending on your retirement goals, you may want to consider saving more than this.
- The government: The government website has a tool that allows you to check your State Pension forecast This shows you how much State Pension you can expect to receive when you retire. To check your State Pension forecast, you will need to enter some information about your date of birth, National Insurance number, and employment history. The tool will then use this information to estimate how much State Pension you can expect to receive.
If you have multiple pension pots, you could combine them into one pot with a pension consolidation service. This can make it easier to track your savings and manage your investments, not to mention you may see a reduction in costs due to having one larger fund rather than multiple smaller ones.
To get an idea of how much retirement income you’re likely to have, you could also use a pension calculator.
Pension calculator
A pension calculator is a tool that can help you estimate how much money you will need in retirement and how much you need to save each month to reach your goals. Several different pension calculators are available online, and most of them are free to use.
To use a pension calculator, you will need to enter some information about your current financial situation, such as your age, salary, and pension contributions. The calculator will then use this information to estimate how much money you will need in retirement and how much you need to save each month to reach your goals.
How to boost your pension savings
Saving enough for retirement can be a daunting task, but it doesn’t have to be. By following a few simple tips, whether you’re just starting out or you’re nearing retirement, there are steps you can take to boost your pension savings and improve your financial future.
- Increase your pension contributions. This is the most obvious way to boost your pension savings. You can usually increase your contributions through your employer’s payroll system if you have a workplace pension. You can increase your contributions by contacting your pension provider if you have a personal pension.
- Make lump-sum contributions. If you have a lump sum of money available, such as a bonus or inheritance, you can make a lump-sum contribution to your pension. This can boost your savings significantly.
- Change your investment strategy: If you’re unhappy with your current investment strategy, consider changing it. You may be able to invest in higher-risk assets, such as stocks and shares, which could potentially give you higher returns. Make sure that your investments are aligned with your risk tolerance and investment goals
- Consider salary sacrifice. Salary sacrifice is a way to reduce your taxable income and increase your pension contributions at the same time. When you salary sacrifice, you agree to give up part of your salary in exchange for an increase in your pension contributions. This can be a good way to save money on tax and boost your pension savings at the same time.
What are some of the risks when planning for retirement?
None of us come equipped with a crystal ball, so like any financial planning, planning for your retirement comes with risks, such as:
- Inflation risk: Inflation is the rate at which prices for goods and services increase over time. Inflation can erode the value of your retirement savings, so you’ll need to factor it into your planning.
- Investment risk: All investments carry some degree of risk. The riskier your investments, the higher the potential returns, but also the higher the potential losses.
- Longevity risk: Living longer than expected is one of the biggest risks facing retirees. This is because it can mean your retirement savings need to last longer than you anticipated.
- Health care costs: Health care costs can be a significant expense in retirement, especially if you develop a chronic illness or require long-term care.
It’s important to be aware of these risks and to take steps to mitigate them. For example:
Investment risk in retirement
Investment risk is the possibility of losing money on your investments. So, as you get older and approach retirement, you may need to adjust your investment strategy to reduce your risk and protect your savings.
Longevity risk in retirement
As mentioned above, longevity risk is the risk of outliving your savings. One way to mitigate longevity risk is to buy an annuity to provide you with a guaranteed income for life.
Get advice from a financial adviser
Planning for retirement can be complex, but it’s important to start early and get professional advice.
Independent financial advisers, such as TheWealthPoint, have the expertise to help you create a retirement plan and estimate how much income you’re likely to need in retirement. They can also help you to choose the right pension products and investment strategies to meet your needs.
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FAQs
Is it a good idea to transfer my pension?
It may be a good idea to transfer your pension if, for example, the performance of your investments has been consistently poor or if the management and platform fees are very high with that particular provider. Our advisers specialise in this area and will be able to conduct the necessary analysis in order to provide you with recommendations that are tailored to you.
Who will inherit my pension if I die?
If you die, any money remaining in your pension will generally be passed onto your beneficiaries, as you will have likely arranged this with your pension provider and will also have this written in your will. If you die before the age of 75, your beneficiaries will not be obliged to pay income tax but if you pass away after the age of 75, they will be charged their marginal rate of income tax.
Should I consolidate my pensions?
You should consolidate your pensions if it is the right thing for you to do financially. Perhaps you have 5 different pots with different providers. The management fees may be very high if you add them altogether. Consolidating your pensions into one pot can help to reduce the impact of fees on your pension but you should consult a financial professional before proceeding just to make sure the decision is right for you now and in the long-term.

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