Retirement planning

To get the most from your pension when you retire – now more than ever – it pays to think ahead. Planning your retirement is one of life’s big decisions, so don’t put it off!

Coronavirus update

The Financial Conduct Authority has put together some helpful information on their website. It explains why you should stay calm and not rush into any financial decisions – and how to avoid pension scams. We recommend you read this before making any decisions about your pension savings.

This can be a very worrying time but hasty decisions could have a big impact on your future. Remember you’ll receive only the current value of your pension pot. So, if you access your pension savings now, you might miss out on any increases in value in the future if markets recover. It’s a good idea to focus on your needs in the long term rather than on current events, and to take advice before making decisions.

If you’re experiencing financial difficulties, it’s worth exploring any other savings you might have before taking your pension savings and looking at what other sources of support are in place. More information can be found on the MoneyHelper website. MoneyHelper also has a debt advice locator tool to help you find out where you can go to get free debt advice.

How much money you’ll need for retirement

The general rule of thumb is that you’ll need between half and two-thirds of the income you had when you were working to have a comfortable retirement. This is just a rough guide though.

Calculate how much you’ll need in retirement

You can use our calculators to help you check how long your pension savings will need to last, and whether you’re saving enough now to live on in later life.

Retirement outgoings

It’s useful to work out your own outgoings so you can estimate how much you’ll need. Some of your costs will go down when you retire, for example if you’ve paid off your mortgage or other debts. However, some may go up, such as fuel bills or entertainment.

This list should get you started:

  • Rent or mortgage
  • Gas bill
  • Electricity bill
  • Council tax
  • Water rates
  • Food and alcohol
  • Landline, mobile and broadband
  • Clothing
  • Travel and motoring
  • Entertainment and going out
  • Insurance
  • Credit cards

How long will your money need to last?

This depends on when you retire and leave paid employment. Putting it bluntly, your pension and other savings will need to last for as long as you do. And longer if you’re providing an income for a loved one who outlives you.

If you retire at 65 today, you can expect to live for approximately another 20 years. Of course everyone is different and you might live much longer than this.

You’ll receive your State Pension until you die, but your employer and personal pensions need to be carefully managed to last your lifetime.

What lifestyle do you want?

Your State Pension will provide a modest income, but probably won’t pay for the retirement you have in mind. If you want to continue enjoying life like you do now, you need to save towards it.

You may find you’re spending more in the early years of retirement on travel, new hobbies or spending time with your family, but remember you might need to pay towards your care as you get older.

For more information on how much you’ll need for retirement, you can also visit the Pensions and Lifetime Savings Association (PLSA) Retirement Living Standards website. The Retirement Living Standards are based on independent research carried out by Loughborough University, and were developed to help picture what kind of lifestyle people could have in retirement.

Planning for inflation

Inflation is the changing cost of household items. Over time, inflation will push prices up, which means that your pension won’t buy as much as it did before.

So, in 20 years’ time, you’ll need more money than you do today to buy the same goods and services.

Sources of retirement income

Once you’ve worked out how much you’ll need to live on when you retire, you can work out how to generate that income.

Your pension pot with The People’s Pension

To find out how much your pension pot is worth just log in to your Online Account.

State Pension

Don’t forget to take your State Pension into account when you’re working out your total income. If you reach your State Pension age on or after 6 April 2016, you may be eligible for the new State Pension.

Calculate your State Pension on

 Other pension pots

If you’ve worked for other employers or been self-employed, you may have other pension pots. It’s well worth tracing old pension pots from previous employers as they can all contribute to your retirement income. If you’re not sure how to find these pensions, you can use a free pension tracing service.

Trace lost pensions on

Other savings

You may have bank or building society savings, ISAs, premium bonds, investments or an inheritance that you can use to top up your retirement income. If you think you’ve lost track of any savings, you can get help to trace them.

Trace your lost accounts and savings

 State benefits

When you get closer to retirement, you’re also eligible for other benefits such as a free bus pass, free NHS prescriptions and eye tests. Depending on your age, you may also qualify for winter fuel payments.

If your retirement income is very low, you may be able to claim pension credit. This can also give you access to other benefits such as housing benefit and a reduction in council tax.

Other sources of income

If you plan to continue working full-time or part-time after you can claim your pension, this will contribute to your retirement income. And if you have additional income from a rental property or holiday home, this will all be counted as income. You’ll need to consider how your total earned income, rental income and pension income could affect your tax bracket as you could find yourself paying more.

Check if your income will cover your outgoings

Our future budget calculator can help you to work out if you’ll have enough income to cover your costs in retirement. Simply input all your different sources of income and see what your future budget looks like. And if it looks like you won’t have enough, it’ll tell you how much extra you might want to save.

Calculate your future budget
Calculate your future budget

Ways to boost your retirement income

If you think your retirement income could fall short of your expected outgoings, there are plenty of ways you can boost your income.

Increase regular savings

Next time you get a wage rise it could pay to put some aside for your retirement.

Adding to your regular pension savings by even a small amount can add up over the years until your retirement – especially because, if you increase your pension contributions, you’ll get more tax relief from the government and your employer might contribute more too.

See an example of increasing regular savings:

Meet Dean…

Dean is 45 and wants to retire at 65 

At the moment he’s saving £30 a month into his pension pot. He needs to generate more income and thinks he can increase his regular savings by up to £20 a month.

If he increases his contributions from £30 to £50 a month, he’ll pay in an additional £4,800 but get back £8,220.

Monthly savings Duration Annual investment return Pension pot at retirement
£20 20 years 5% £8,220
£30 20 years 5% £12,331
£40 20 years 5% £16,441
£50 20 years 5% £20,551

Note: These figures are just an example. Actual investment returns will fluctuate and may go down. The past performance of investments doesn’t guarantee or act as a guide to future performance.

If Dean increases his pension contributions, he’ll also receive more tax back from the government, which will be added to his pension pot. And if he pays in to an employer scheme, his employer may contribute more as well.

Work out how much extra you might want to save with our future budget calculator

Add lump sums

You can also add lump sums to your pension pot to boost your retirement income.

For example, if you receive an inheritance or win the lottery and decide to put £2,000 in your pension pot, after 20 years, growing at 5% a year, it will be worth £5,425 – more than double.

Note: These figures are just an example. The past performance of investments doesn’t guarantee or act as a guide to future performance.

Combine your pensions into one

If you have several pension pots with different providers, it may be a good idea to combine them in one pot. This will make it easier to keep track of your overall savings and estimated income at retirement. It also makes sense if you’re paying high fund charges with one provider when you could get the same choice and service from another provider who charges less.

Before you transfer though, check what type of pension you have. Final salary schemes, or defined benefit schemes are usually best left where they are as your retirement income is pre-agreed. Transferring these types of schemes will mean you lose this certainty.

Other schemes, such as defined contribution schemes can be transferred. Some schemes charge you to transfer, so check first if this is the case and if it’s still worth your while.

Interested in transferring your pensions to The People’s Pension?

If you want to transfer your pensions to The People’s Pension, we’ll do all the work for you.

Retire later in life

You no longer have to retire when your employer tells you to, or even when you start taking your State Pension.

So, if you think you can’t afford to retire, you don’t have to. You can continue working full time or part time and carry on contributing to a pension pot while you’re working to create more income for when you stop working completely. The longer you defer taking your pension, the more time it has to potentially grow and the more income it should generate when you need it.

You can also defer taking your State Pension.

If you decide to retire later, please let us know – you can change your retirement date in your Online Account.

Use other savings to top up your retirement income

Income for your retirement doesn’t have to just come from your pensions.

If you have bank or building society savings, ISAs, premium bonds, investments or an inheritance, you can use them to top up your retirement income.

Generate additional income elsewhere

If your pension income falls short, there are numerous ways to generate an income elsewhere.

For example:

  • Part-time work
  • If you own your home, rent out a room or even your driveway
  • Make money from a hobby
  • Set up your own business
  • Downsize your home
  • Move to a cheaper area

Of course all these options will have their pros and cons.

Bear in mind the tax implications of generating extra income and how much it costs to set up a business or move home. And if you move, always let your pension provider know your new address.

Retirement countdown

Kicking off 15 years before you plan to retire, our timeline shows what you need to do and when you need to do it.

Each time period below gives you a quick checklist of what you should be considering at that stage. These are the important milestones as you approach your retirement years.

15 years until retirement

It may seem like a long time until retirement but our investment approach means we’re already thinking ahead.

If you invest in the ‘balanced’, ‘cautious’ or ‘adventurous’ profiles, your money will gradually switch to more secure / lower risk investments, to safeguard your savings as you get closer to your chosen retirement date. This ‘glidepath’ process begins 15 years before you retire. So if you plan to retire at 65, we’ll start your glidepath when you turn 50.

If you think you might retire earlier or later than your chosen retirement age, this will affect your glidepath. You can change your selected retirement age in your Online Account.

Find out more about how your money is invested and your glidepath

6-10 years

Now’s the time to take a good look at your retirement.

There’s still time to plan ahead if you think you won’t have enough to retire.

Work out how much money you’ll need in retirement 

2-5 years

Retirement is getting closer.

Start thinking about how you’d like to retire and what you want to do with your time. This will help you work out when to retire.

Explore the different ways of taking money out of your pension pot

1 year

Take time to look at your options for creating your retirement income and choosing what’s best for you and your loved ones.

If you want to carry on working, discuss this with your employer.

Think about these important considerations when deciding how to take your pension pot 

6 months

With retirement only months away you should have a clear idea about how you want to take your pension.

We’ll send you a pack of information, including a valuation of the pension savings you have with us. You can also download a guide from MoneyHelper on the full range of options the law allows.

And download our options at retirement brochure which will explain how you can take your pension savings with B&CE.

Plus you can download a booklet from The Pensions Regulator on avoiding pension scams

Log in to your Online Account to claim money from your pot with The People’s Pension

Get ready for retirement

As you come up to retirement, get your paperwork in order, so you’re ready to take your pension when it suits you. With your selected retirement date only months away you should have a clear idea about how you want to take your pension.

What to do next

Getting organised to take your money may take a while so give yourself plenty of time to get your paperwork in order. Here’s our checklist of things you’ll need.

Retirement paperwork checklist

Pension statements for all your pensions

Much of the information you’ll need to complete your pension claim form can be found on your pension statements. When you want to take your pension pot we will also ask you about any other pension savings you hold. So if you have other pension savings, you’ll need these statements to hand as well.

Pension valuation

It’s useful to have up to date valuations of all your pension savings and a State Pension forecast so you can see exactly how much money you will have when you retire. You can get valuations from your pension provider. You can get a State Pension forecast online.

Confirm the date you want to take your money

Although you can usually get access to your pension savings from age 55 (proposed increase to age 57 from 2028), most pensions have a selected retirement age. This is often the same as your State Pension age and it’s used to work out your pension valuation. If you take your money early, this can affect your pension valuation.

Check what type of pensions you have

Not all pensions are the same. Some pensions have special rules that may affect when you can take your money or might incur charges if you cash in early.

Read all the information about your options

Make sure you’ve read and understood the information sent by your pension providers. If you have any questions, give them a call. You can contact us about your pension savings on 0300 2000 555. Calls are recorded for training and monitoring purposes.

Book a MoneyHelper guidance session

When you have all your pension details together, you’re ready to book a free MoneyHelper guidance session.

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