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Retirement planning checklist - How to prepare for retirement

Jasmine Birtles - Money expert.

Jasmine Birtles

Money expert, financial journalist, TV and radio personality

Last updated 10th November 2020

7 min read

You’re in your 50s or 60s and you’re realising that retirement is closer than you thought.

You may already be thinking about the State pension you will receive (more on this below) but for most people, it’s their personal or company pensions that will really make the difference to their income.

In fact, right now you can dip into these private pension pots by the time you’re 55 if you would like to retire early and have the cash to do so. That age will go up to 57 by 2028, so if you’re under 47 now you will have to wait an extra couple of years to access your personal or company pension.

Taking your pension early can be an option if you have a definite plan or need for the money, for example if you’re considering paying off existing debt. However, this should always be decided with caution and with guidance from a financial adviser.

Whatever your planned retirement age, as you move towards it there are various decisions that need to be made; decisions that could affect your wealth for the rest of your life.

The problem with decisions that are important is that they can seem so overwhelming that we can end up not deciding anything at all! But if you take it step-by-step, and make the most of advice available, you will be able to make the right decisions for your current and future wealth.

Coming up to retirement - what should you do?

Here’s a checklist of what you should do to prepare for retirement as you move towards it:

1. Give yourself a financial health check

Dig out any paperwork you have on your personal or company pensions and add up the total amount you have in them. Then take a look at any other investments you have such as ISAs, cash savings, property investments, stock market funds and so on, and add up the totals there.

To work out roughly how much of an income you could get from this total each year, multiply it by 3%, as that is, conservatively, what you could get as an interest rate on your combined investments. So, if you have £200,000 in total in your savings, you could make around £6,000 a year from it.

2. Check your National Insurance contributions

In order to qualify for the full State pension, you need to have contributed National Insurance payments for at least 35 years. If you took time off to look after children or a vulnerable adult, then you should have gained National Insurance credits. Check at the Government website to see if you are up to date with your payments.

3. Complete your ‘Expression of wish’ in your pension details

This tells your loved ones who you’d like your savings to go to if you die before you retire. At the same time, update your will so that it is clear where your pension money should go as well as your other assets.

4. Check that your contact information is to up to date on your pension documents

Have you moved or changed your name recently? Speak to your personal or company pension provider to find out how they plan to communicate changes with you.

You need to have changes or updates to your pension situation sent to you in good time so that you can work out what to do next with your retirement savings with enough time to think it through.

5. Watch out for scammers

If you get a call out of the blue from someone offering to help you move your pension or put it into something that will get you a better return, slam the phone down. It’s illegal for companies to cold call you about your pension savings.

If you’re offered a free pension review or an investment opportunity, say no and tell ActionFraud about it. To find out more, read our guide on how to protect yourself from scams.

6. Get genuine free help

Luckily there is some genuine help out there that is free and impartial. Pension Wise is a government service that offers information about the different ways that you can take money from your pension savings. If you’re over 50 and want to understand your options, visit their website.

7. Trace old pensions

Changing jobs every few years is becoming the norm – so how do you keep track of all your pension pots? Hunt out any paperwork that you have from former employers and see how much you have. If you’re not sure, use the free Pensions Tracing Service by the Government.

If you have a few pensions with different providers, consider transferring them all into your current provider.

It isn’t always the best idea to do this as there is often a penalty for moving a pension from one provider to another, so it’s best to pay for advice from an independent financial adviser who will do the sums and work out if this would be the best way for your pension pots. It will cost to use an adviser, but in the long run it tends to be worth it to get proper financial advice on something as important as your retirement wealth.

You can get a free session with a trusted financial adviser through an offer from VouchedFor.co.uk and MoneyMagpie.com here.

8. Make sure you can access your spouse’s pension

If your spouse has a company or personal pension, make sure you will be able to access it if they die early. Sometimes it’s just a question of making sure the right boxes have been ticked.

Also, you could potentially get some of your ex-spouse’s pension. In a divorce it is now possible for one spouse to access some of the other’s pension pot. This is particularly important for women as they usually have the lower level of savings.

Speak to your lawyer if this hasn’t been addressed yet.

9. See what level of State pension you can get

The age at which you can start to draw your State pension has just gone up to 66. It will go up again (incrementally) to 67 by 2028 and then will be 68 by 2036.

If you are unsure at what age you will qualify for the State pension, check for it on the Government website.

Of course, the State pension should not be your only source of income in retirement. It’s a good start but is not enough to fund the kind of lifestyle that most would want.

Currently the maximum that you can get is £175.20 per week. This will be on top of any private pension that you save for either independently or through work.

If you are retiring soon it’s helpful to work out whether you’re entitled to a Basic State Pension or a New State Pension. This depends upon your date of birth. You can check via PensionWise or check the State Pension forecast site on Gov.uk.

It’s also important to know that you won’t start receiving your State Pension automatically. In fact, you need to apply for it. Find out how at Gov.uk.

Not enough money?

If you have done all of the above and found, to your horror, that you only have enough money saved up to live on baked beans rather than smoked salmon, don’t panic. There are a few things you can do to improve that situation.

Contribute more to your company pension fund

You may notice money coming out of your salary every month for your pension, but do you know what percentage of your wages that actually represents? If it’s low, like 5% or 7% of your salary, could you afford to sacrifice more now to help pay for your future?

If you work for yourself, do the same with your personal pension. Admittedly you don’t get the benefit of extra contributions from your employer there, which people on PAYE get, but it will still help to grow your pot.

Add to your other investments

As well as putting more into your pension (or instead of that) could you put more into ISAs? If so, aim for stocks and shares ISAs rather than cash ISAs as they tend to do better over the long-term.

Use your bonuses

If you get commission or bonuses in your work, consider using them as a pension-booster.

When you get a bonus or commission payment, ask your employer to use it to make a one-off boost to your company pension.

Pick up a side-earner

A lot of people who are facing a shortfall in their pension savings take on a side-hustle and earmark the money they make from that to boost their retirement income.

There are hundreds of different ways to make extra cash in your spare time, depending on your skills, geography and time constraints. It could be baking cakes to sell at car boot sales and markets, doing some dog-walking in your area, tutoring local kids or those online, helping people with their computers and much more.

Put off retirement

There’s no law that says you have to retire by 66. If you don’t have enough money to give yourself a good income going forward, you can legally continue to work.

You could even stagger your retirement – if your employer allows you – by going part-time for a while. Or, if that isn’t possible, look at the side-earners mentioned above and use one of those to supplement your income while you’re actually retired.

Many studies have found that people who work in retirement are healthier and live longer than those who don’t, so it’s not such a bad thing to be forced to work anyway.

Useful resources

Gov.uk – the Government’s information site which has a whole section on pensions and retirement

Pensionwise.gov.uk – the free advisory service for people over 50 wondering about retirement

PensionsAdvisoryService.gov.uk – full of information about pensions

Ageuk.org.uk – information and reports about pensions and retirement

Which.co.uk – full of useful information about pensions and retirement

Moneyadviceservice.org.uk – full of useful information about pensions and retirement

Jasmine Birtles is founder of the self-help money and consumer websitee MoneyMagpie.com