Retirement used to be reassuringly predictable. On your 60th or 65th birthday you switched overnight from full-time employment, perhaps via a gold watch presentation, to having time on your hands you didn’t quite know what to do with.

At the same time, you bought an annuity with the money in your pension pot you couldn’t otherwise get your hands on.

Today, everything is different. Not only are we living longer, healthier and more active lives, most of us can now decide when, how, and even if, we retire.

With the introduction of pension freedoms, there is no onus on us to cash in our pensions at set ages, and instead we can take our pension money any way we choose. But, with this freedom also comes responsibility, and for some, uncertainty.

Many of us have no clear plan for what we want from our retirement, and even more of us underestimate how much money we will actually need for it when we do. Looking at retirement as a whole, our pension isn’t necessarily the first thing we should be thinking about when it comes to planning where our retirement income will come from.

Instead we should be thinking of all our savings and investments collectively and getting advice on the most efficient strategy that incorporates them all, in order to meet our needs. And, money aside, what we each want from our retirement is unique. So, whether your ambition is to simply spend more time with the grandchildren, go back to studying, start a new business or take on an ironman challenge, a truly fulfilled and rewarding retirement requires as much planning as your career or business did.

Life expectancy at age 65 has increased by 40% for men and 23% for women since 1980. 

That equates to having to find the means to fund 5.2 and 3.9 more years in retirement respectively.

* ONS, National Life Tables 2010 to 2012

A white house sits atop a cliff, bordered by ocean and purple heather

Things to consider when planning your retirement

How much money will I need?

How much money you need will naturally depend on the lifestyle you aspire to in retirement, how long your money needs to last, how much you want others to inherit and the returns you can expect from how you are investing. As a benchmark, The Pensions and Lifetime Savings Association has published a set of ‘retirement living standards’ which suggests a couple will need £47,500 a year, allowing them three weeks of the year holidaying in Europe and £300 a month for dining out. These guidelines assume you will have paid off your mortgage and you will need combined savings and investments of well over £1m to afford a comfortable lifestyle.


The reality is your goals are all very individual, but whatever it is you want from your retirement, it pays to plan ahead.


Our team of Financial Planners can review your current savings, model your likely expenditure and let you know if you are on track to enjoy the retirement you desire.

The value of financial advice versus a DIY approach

If you haven’t sought help in the past, you’re not alone. The Financial Conduct Authority estimates that there are more than 18 million people in Britain with significant savings and investments who have never taken professional financial advice. Yet, all the evidence suggests that it genuinely does make a positive difference. In 2017, the International Longevity Centre published a report, The Value of Financial Advice, which demonstrated that people who take professional advice accumulate significantly more financial assets and pension wealth than people who don’t. The pension pots of people who took ongoing advice were, on average, 50 per cent larger than of those who had only taken advice once at the beginning. In fact, savers who took advice in the early 2000s are on average £47,000 better off a decade later than those who chose to go it alone.

What is the lifetime allowance?

The lifetime allowance is a complex pension rule that limits the amount of pension benefit you can build up without triggering an extra tax charge, unless you have one of the many forms of protection. The lifetime allowance for the tax year 2020/21 is £1,073,000 and it is likely to increase in line with inflation each new tax year. It may be necessary to take your pension early or stop contributing to a pension scheme, even though you have not retired, to avoid your benefits exceeding the allowance.


When the lifetime allowance was introduced in 2006, and in subsequent years when it has been reduced, there have been various options available to ‘protect’ benefits. These protections have come with various requirements and restrictions, and so retirement planning, particularly around pensions, can be particularly complex.

Should I prioritise saving into a pension or an ISA?

In an ideal world you’d want to maximise the tax advantages of both. But assuming you have a few other things to spend your money on, investing in pensions should in most instances be your priority. Pension contributions will not only help you save money for your retirement, they can also lower your income tax.


The pension route is especially important if you’re earning over £100,000, which is the point at which you’ll start to lose some or all of your tax-free personal allowance. What’s more, you’re free to contribute 100% of your annual earnings up to a maximum of £40,000, double the ISA allowance. And, if you haven’t used your annual allowance over the past three years you can usually carry at least some of it forward to the current tax year.  It could therefore be possible to contribute as much as £120,000 to your pension in one tax year. As always, there are significant complications around this, so getting advice from a Financial Planner is the best way to ensure you’re maximising your options.

Is it too late to boost my retirement pot?

There are many ways to ensure you optimise your retirement pot including working longer, delaying taking your pension or choosing to work part-time.


But if working longer isn’t in your plans, then other options include fully utilising your annual ISA allowance of £20,000 (£40,000 for a couple) or topping up your pension, potentially enabling you to benefit from up to 45% pension tax relief (up to 26% if you are a Scottish taxpayer). You can also top up your pension through salary sacrifice, potentially saving you both income tax and NI contributions. Another important way to boost your pot, and one often overlooked, is to regularly review the performance of your pension fund and, if necessary, switch funds to try and achieve better performance. A non-working spouse or civil partner could also look at using their tax allowances to invest in a pension, potentially increasing the overall retirement income you can benefit from as a couple.

The eighth wonder of the world, or how to retire early

Most of us recognise the earlier we start saving and investing for our retirement, the better. But, how many of us realise it’s the cumulative impact of saving earlier that can make a huge difference to our final retirement pot? Reputedly described as the eighth wonder of the world by Albert Einstein, compound interest, which put simply is interest on interest, can also be compared to benefits seen with re-investing growth and dividends, that can help you exponentially grow your wealth. As a simple example we can compare how two people save in different ways, with both benefiting from an identical 7% annual investment return. Person A invests £5,000 per annum starting at age 18. At age 28, they stop, having invested for 10 years and a total of £50,000.  Person B invests the same amount of £5,000 per annum but starts where Person A left off at age 28. They continue investing for 30 years until retirement at 58, investing a total of £150,000. Person B has invested three times as much and for twenty years longer than Person A, yet Person A has a portfolio worth £602,070 whilst Person B has only £540,741. The effect of compounding was so significant Person B couldn’t catch up if they saved for another 20 years. But don’t worry. Even if you started saving later in life, it’s still possible to build a bigger retirement pot.

Middle-aged man on a scooter travels down a tree-lined street
Simon F, Leeds

After more than 25 years in my career – I found myself in a position whereby I had several company pensions, but no idea what they were, how much they were worth or how to find out.

Start planning for your retirement today

Know when to retire

In retirement, as in comedy, timing is everything. Financially and emotionally, choosing the right moment to retire can make all the difference to enjoying your golden years.

Don’t leave it too late. Act now.

See how we can help you plan your ideal future.

Need help planning where your retirement can take you?

To send us a message or have an informal, no obligation, conversation about Retirement Planning, please get in touch with your local office or one of our Financial Planners.

Investec Wealth & Investment (UK) is a trading name of Investec Wealth & Investment Limited which is a subsidiary of Rathbones Group Plc. Investec Wealth & Investment Limited is authorised and regulated by the Financial Conduct Authority and is registered in England. Registered No. 2122340. Registered Office: 30 Gresham Street. London. EC2V 7QN.