Retirement needs planning

As a financial advisor, part of our role is to work with our clients to determine how much money they will need in retirement. Clearly, this will vary from client to client as they all have differing needs and expectations.

Most people I have come across have managed to put something aside towards their retirement whether that is an old employer’s pension arrangement, ISA or other investments such as property etc. My job is to sort out arrangements that clients already have in place and to shape them into a robust plan to help the client achieve the retirement they desire, or as close to it is as possible.

One of the challenges is how to make their retirement pot of money last as people are now living longer. Increasing life expectancy means people may have to save more to get the retirement they desire. Spending too much too early in retirement can cause problems later in life such as running out of money too soon!

How much will I need?

This is a question that I am often asked and encourages one of the more satisfying discussions that an advisor can have with their client. Here are some of the questions that need to be addressed:

how long do you want to continue to work?
are you going to stop completely or continue to work, perhaps part-time or doing something you enjoy such as a hobby or charity work?
how are you going to fill your time in retirement?
what do you expect your on-going costs and obligations to be?

Typical answers seem to be:

to spend time with family, possibly grandchildren and friends
travel – if/when allowed
passing on wealth to the next generation
and probably because of the longevity mentioned earlier, looking after elderly parents.

Once a discussion with the client and their spouse has taken place, and they’ve agreed what they would like their retirement years to look like, an income figure can be determined to meet their anticipated expenses.

How am I going to get there?

In my experience, everyone’s circumstances continue to change, and it is likely that by retirement our clients would have most of, if not all, of their mortgage paid-off and their children would no longer be dependent on them. As a result, their expenses should be much lower, so their income needs may not be as great as they are now.

As a first step, don’t forget your state pension. A full state pension is now around £11,973 a year according to 2025/26 figures. The number of qualifying years on your National Insurance record affect how much State Pension you receive and you’ll need at least 10 qualifying years to get any new State Pension.

You can check your state pension forecast online to find out what you could get, and when you can get it. However, it may be a shock for some as the state pension age will reach 67 by 2028 for men and women.

If you want to retire sooner and wish to enjoy a greater income in retirement, there are a number of arrangements to help you do this. Making use of tax-advantaged arrangements such as ISAs and pensions makes a lot of sense as wealth and capital can be accumulated to produce a cash flow to meet future income needs. Funding via a pension makes a lot of sense as:

personal contributions can continue to benefit from income tax relief at your highest marginal rate (subject to annual allowance rules)

your employer may match the contributions you make up to a certain level thus boosting the amount saved
employers can benefit from corporation tax relief on the contributions they make
the pension funds grow free of income tax and Capital Gains Tax
25% tax free cash is still available (subject to lifetime allowance rules)
most pension funds sit outside of the estate for Inheritance Tax purposes.

In addition, benefits can be now drawn flexibly so you can vary your income according to your needs. You can also secure your income via an annuity if required.

For those of us who are still saving for retirement, it does take some time to accumulate our retirement pots so it’s best to get into the habit of saving regularly as soon as possible. As the old proverb goes, the best time to plant a tree is yesterday. The next best time is today.

Please note the information contained is correct as at the date of this article.

A pension is a long-term investment, and your eventual income may depend on the size of the fund at retirement, future interest rates and tax legislation.

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