A 10 point checklist in the run-up to retirement

As you approach retirement, it's essential to ensure you have everything in place for a smooth transition. Proper planning can help you enjoy a more comfortable and secure retirement. This 10-point checklist will guide you through the key steps to take in the run-up to retirement.

1. Work out the value of your pensions

Review your workplace and personal pensions to understand their current value and how they will contribute to your retirement income. Consider consolidating multiple pension pots for easier management. However, you might have valuable guarantees you’d lose if you transfer to another pension plan, so you should speak to a financial adviser before making this decision.

2. Consider pension top-ups

Consider last minute top-ups to your pension. The more you contribute, the larger your pension pot could be when you retire. If you’re still working, you could take advantage of any employer contributions to further boost your pension.

Also, you may want to think about adding a lump sum to your pension to benefit from tax relief. As an example, lets say someone moves £20,000 in a low interest savings account that they don’t have an immediate need for into their pension. It would be boosted to £25,000 through tax relief if they were paying tax at 20% - if they were paying tax at a higher rate they may get even more. Please remember that tax rules can change and the impact of taxation and any tax relief depends on your circumstances, including where you live.

3. Get a state pension forecast

The state pension forms a significant part of retirement income for many people. Check your state pension to see how much you will receive and when you can start claiming it – you can find your forecast at www.gov.uk/check-state-pension. The full new state pension is currently £230.25 per week, but this amount can vary based on your national insurance contributions.

4. Create a retirement budget

Create a detailed budget that outlines your expected income and expenses in retirement. Consider essential costs such as your mortgage, utilities, food and healthcare, as well as more nice to have costs like travel, hobbies and entertainment. Having a clear budget will help you choose the right way for you to take your money, manage your finances and avoid overspending.

5. Remember healthcare costs

It's a good idea to plan for potential long-term care needs and understand the options available to you. They can be a significant expense in retirement and in some instances you may have to sell your home to pay for them. So, having a plan for how you will cover these costs is essential.

6. Decide if you want to leave money behind

You might be planning on leaving money behind for loved ones. If so, it’s important to understand the different options and the tax implications. If buying a guaranteed income for life (also known as an annuity), you could leave an income to a loved one but it means you would receive a lower income. If taking flexible cash or income (also known as drawdown) then any money that's left can be passed to a loved one, but it could be subject to tax.

We should also point out that from 6 April 2027 any money and death benefits left in your pension after you die will be included in your estate for Inheritance Tax purposes. Although this rule will apply to most pensions, there may be some that aren't affected, so we'd recommend speaking to a financial adviser.

7. Explore your income options

When it comes to accessing your pension, you have several options. Two of the most popular options are a guaranteed income for life and flexible cash or income.

Each option has its pros and cons, so it's essential to understand which one is best suited to your needs. What you’ve explored in the first six points in this checklist could help you choose the right way for you. We give more information on these options in our accessing your pension savings page.

8. Consider tax implications

Understand the tax implications of your retirement income. While the first 25% of your pension pot can usually be taken as a tax-free lump sum, the remaining 75% is subject to income tax.

Some income options like flexible cash or income, give you more flexibility over how you take your money, so you could potentially manage your withdrawals to stay within lower tax bands and reduce your tax liability.

9. Review you pension investments

Your pension pot is likely invested in a range of assets, such as stocks, bonds and property – each carrying a different level of risk. Review your investment strategy to ensure it aligns with how much risk you’re comfortable taking and your retirement goals. As you get closer to retirement, it’s a good time to consider your investment options.

If you plan on taking a guaranteed income for life, you may want to consider more conservative investments to try protect your savings from any sudden drops in value. If you're going to take flexible cash or income then it likely means your money will be invested for the foreseeable future and so your investment choices should reflect that. But please remember as with all investments, the value can go down as well as up and you might get back less than you put in.

10. Update your will and estate plan

Ensure that your will and estate plan are up to date. This includes nominating beneficiaries for your pension and other assets, setting up trusts if necessary and considering inheritance tax implications. Inheritance Tax bills can take a large chunk of money you’ve earmarked to leave for your loved ones, but good estate planning can help reduce any tax liability. More information on some of your options can be found in our passing on your legacy page. 

What else would we recommend doing?

Navigating the complexities of retirement planning can be challenging. You’ve worked hard to save this money and so it’s vitally important you make the most of it and enjoy your retirement as much as you can.

Our professional financial advisers can help you understand your options, create a tailored retirement plan and help you get the retirement you want. They can also provide valuable advice on tax planning, investment options and risk management.

To speak to one of our financial advisers and start ticking off your 10 point checklist, simply click the button below.

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