How to plan for retirement

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Kirsty Kerr

August 23, 2023

5 mins read

It’s never too early or too late to start planning for your retirement. Get started by using these planning tips to help you feel more confident about life after work.

Planning for retirement can feel complex and overwhelming. How long will your savings have to last and what sort of lifestyle would you like to enjoy? There is a lot to consider so it can be hard to feel confident that you’ve got the right plans in place. We want to help keep things simple. So we’ve broken down some key steps you can take to help you prepare, one step at a time.

Step one: Think about when you want to retire

Do you have a retirement age in mind?

It will help to know when you’ll be entitled to claim your State Pension, as that forms part of most people’s retirement plans.

Be sure to check if the retirement age you have in mind is the one on your pension plans and update this if it is different. If you’re a Standard Life customer, we’ll get in touch with you as you approach your retirement date to make sure it’s still right for you. We’ll also give you some useful tips and help you better understand the steps you need to take as you approach retirement.

Your retirement date may seem like an unimportant detail, but the age you have on your plan can affect investment choices the nearer you get to it. And remember if you’ve moved jobs a few times you may have more than one pension to keep up to date. 

Also bear in mind that the age at which you can access money from your pension plan is currently 55, but this is due to rise to 57 from 2028.

Being clear about your retirement age and then working out the size of the savings pot you’ll need before you’ll be comfortable leaving work behind can be really motivating. 

Step two: Get to know your retirement options

Deciding how you plan to take your pension money is a key part of any retirement plan. 

If you’re getting close to retirement, it’s time to start investigating how to make the best use of the savings in your pension pot. Will you take out your money in lump sums? Will you leave money invested during your retirement and take it flexibly as and when you need it (also known as drawdown)? If you do that, what will you invest in? Will you convert it into a guaranteed income for life (sometimes called an annuity)? 

Check with your provider that your pension plan offers the options that you want. If they don’t, shop around and compare providers to find a deal that works for you. You may find you get more from your retirement income as a result.

Step three: Work out how much you might need in retirement

What sort of retirement lifestyle would you like to enjoy? Will your mortgage and other debts be paid off? Do you plan to travel and spend some of your hard-earned savings? How much money do you need to retire? 

The answers to these and many other questions are very important when it comes to working out what you’ll need by way of an income every year. They’re also worth discussing with whoever you plan to spend your retirement with.

The Retirement Living Standards, published by the Pensions and Lifetime Savings Association, give a helpful starting point when retirement planning. 

They’ll tell you how much you might need to fund a minimum, moderate or comfortable lifestyle whether that’s as a couple or a single person.

Step four: Understand the bigger picture

When you have an idea of the kind of lifestyle you’d like and the income you’d need to pay for that, the next step is to see whether your savings can support this.

Starting with your pension pot, you will need an accurate picture of where you are right now. Most pension plans let you check online any time how much you’ve got and if your savings are on track. You can find out more about our online services on our website, or visit our support page for FAQs and ways to get in touch.

You can see how much any pension plans could be worth when you come to retire by putting some basic details into our pension calculator, which will also take into account what you might expect from the State Pension. 

At most, the State Pension will give you just over £10,600 a year. This would mean you need roughly £13,000 more a year if you were aiming for the ‘moderate’ lifestyle outlined above. So this is where your personal and workplace pension plans and any other retirement income sources like ISAs or other investments come in.

And don’t forget to take into account other income options you might have from things like part-time work, rental income or other savings.

Step five: Track down lost pots

Could you have a ‘lost’ pension? If you had a previous job (or jobs) that came with a pension plan, then there could be a pot of pension money waiting for you. Tracking down and combining your pots could help give you a clearer picture of how much you currently have in pension savings. 

Transferring other pension plans may not be right for everyone, you’ll need to consider all the facts and decide if it’s right for you. You could lose money by giving up any guarantees or benefits you might get from your other pension plans. There’s also no guarantee that you’ll get more as a result of transferring.

The information here is based on our understanding in September 2023 and shouldn’t be taken as financial advice.

The value of investments can go down as well as up and you may get back less than was paid in.

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