The UK could be on the precipice of a private pensions crisis, with research suggesting that at least 17% of Brits aged 55 and older have access to no long-term savings other than their state pension.
Even among younger citizens, just 21% of Brits have no private pension funds at all, and it’s important to be proactive when organising your finances and saving for your retirement.
We’ll explore some of the steps that you can follow below while factoring in any tax considerations or challenges.
Table of Contents
Getting Started – When Can You Retire and How Much Will You Need?
Theoretically, there’s no limit in terms of when you’re able to retire, so long as you have the private pension funds and savings to fund your lifestyle.
However, the state pension, which is based on National Insurance (NI) contributions, won’t be available until you reach 66. This age is relevant to both men and women, and it’s poised to start increasing once again from May 6th, 2026.
In fact, the state pension age is expected to reach 67 by 2028 at the latest, while it should increase further to 68 between 2044 and 2046.
Your workplace pension will be made available in either monthly or lump sum payments once you’ve retired, so it’s important to determine how much you’ve accumulated throughout your working life.
You’ll also need to consider how much income you’ll need during your retirement. The state pension is currently fixed at £185.15 a week (although this may vary depending on your circumstances), while the value of workplace and private pensions will vary depending on your contributions.
To understand your requirements and how long you’ll need to work or invest for, create a budget of your outgoings in retirement and factor in any travel plans. Then, factor in your income streams and identify any shortfalls in your planning that will need to be addressed.
Your Pension Plan – Tax and Checklists
When creating a detailed pension plan, you must consult with a comprehensive tax guide.
This will inform you about how much you need to repay in tax on your existing investments and income, making it easier to calculate how much disposable income you’ll be left with at the end.
You should also ensure that you’re saving in the most tax-efficient manner, including utilising ISAs when holding cash and making the most of tax relief in relation to workplace pensions.
You’re also free to withdraw 25% of your pension savings in the form of a tax-free lump sum, and it’s worth considering this when organising your finances.
In addition to calculating your pension income and tax liabilities, it’s also important to check to see if you’re entitled to any additional benefits as you approach retirement (such as carer’s allowance), council tax reduction or housing benefit.
You should also obtain an accurate estimate concerning your state pension, and determine precisely how much is left on your mortgage and how you want to go about paying down this debt.
