Most people retire in their mid-to-late 60s. So if you’re in your 50s, you might still have another decade or so to prepare for your retirement.
The closer you get to retirement, the more you might worry about having enough in your pension to live off comfortably. Fortunately, there’s an easy way to find out, and a number of things you could do to improve your situation if needed.
Are you on track to receive a large enough pension?
According to research from the Pensions and Lifetime Savings Association (PLSA), the average single person would need around £14,400 each year to live a minimum lifestyle, while a couple would need £22,400. Their Retirement Living Standards show you what life in retirement looks like at three different income levels. For a moderate standard of living, a single person would need £31,300 each year, for a couple it’s £43,100. Finally, for a comfortable standard of living, a single person would need £43,100 and for a couple, it’s up to £59,000.
To check if you’re on track, you can use our Pension Calculator. It’ll show you how much your pension could be worth at retirement and how long it could last if you draw down a desired amount each year.
You can specify when you want to retire - just keep in mind that the current age you can access any defined contribution pension is 55 but this is rising to 57 by 2028. While the State Pension age is currently 66 and rising to 67 from 2028. Using the Pension Calculator you can adjust your contribution amount and retirement age, choose whether to take out a tax-free lump sum at 55 or include the full new State Pension. You’ll quickly see whether you’re on track.
If you’re a little behind where you want to be, you could consider:
contributing a lump sum;
delaying your retirement; or
consolidating your old pensions.
Are all your pensions in one place?
When it comes to retirement planning, it helps to have all your pension savings in one place. But the average person has 11 jobs throughout their working life - that’s a lot of pensions to keep track of!
Combining your old pensions into a current or new pension plan:
makes it easier to manage your money;
helps you to see how much your retirement savings are worth;
could save you from paying excess fees; and
may improve the performance of your investments.
Before you consolidate, check your current pensions for any valuable benefits you might have. This is more likely if you have a defined benefit pension, for example. If you aren’t sure, check with your pension provider or an Independent Financial Adviser (IFA). If you have a defined benefit pension worth over £30,000, you’ll need to seek independent financial advice before transferring your pension.
Are you invested in an appropriate pension plan?
At PensionBee, we offer a range of curated pension plans to suit various savings needs and personal values. As you approach retirement, you might want to make sure that your plan matches your retirement goal and your age.
One of the most important factors that indicates whether a plan is appropriate for you is its risk rating:
A lower-risk pension plan - puts your money into investments that have lower potential for growth but a lower potential for experiencing short-term losses due to market fluctuations.
A higher-risk pension plan - puts your money into investments that have higher potential for growth but a higher potential for experiencing short-term losses due to market fluctuations.
Savers will typically want a higher-risk pension plan while they’re younger, and a lower-risk plan as they approach retirement.
PensionBee has two default pension funds for different age groups. When signing up, if you don’t choose a specific plan, you’ll be invested in one of these based on your age. If you’re 50 or over when you sign up, you’ll be invested in the 4Plus Plan. In this plan, your money is invested in a range of assets and is actively managed by experts as you approach retirement. If you’re under 50 and are still saving for retirement, you’ll be invested in the Global Leaders Plan. This is a predominantly equity-based plan to focus on growth in your accumulation years.
When do you want to retire?
The earlier you retire, the more money you’ll need in your pension to support you throughout your retirement. The earliest that most pension providers will allow you to access your pension is 55, (rising to 57 from 2028). However the State Pension age is currently 66 (rising to 67 from 2028)
*Let’s assume that you’d like to retire in your mid-60s and achieve the PLSA’s moderate standard of living. You’d need a pension pot of around £200,000 of which you take an annual income of £19,500, plus the full new State Pension of £11,973 (2025/26). This would generate a yearly income of just over £31,300 which would last around 20 years.
If your pension savings aren’t where they need to be, you could consider delaying your retirement for a few more years.
*These calculations assume your current and desired retirement age is 65 years old, you have a defined contribution pension pot and you don’t take 25% of your pot as tax-free cash.
Source: PensionBee’s Pension Calculator.
How do you want to receive a pension income?
There are several ways that you can take money out of your pension. And each has its pros and cons.
You could:
draw down a regular amount each month;
take out a lump sum when you need to;
use your pension to buy an annuity; or
Many people choose to draw down a regular monthly income, as it’s a method of receiving money that they’re familiar with. It’s easy to budget and it’s also easy to calculate how long your pension could last. The downside, though expected, is that it’ll eventually run out.
Taking out a lump sum every now and again could be worth considering if you don’t plan on relying on your pension to cover day-to-day living costs. And because 25% of your pension can be taken out tax-free, many people choose to take out the tax-free part of their pension at 55 before they fully retire for a nice cash boost.
You could also buy an annuity with your pension, which will pay you a regular amount for the rest of your life (or a certain amount of time). The advantage is that it could never run out, but you won’t be able to take out a lump sum if you need to, and it generally pays out a smaller amount than drawing down from a pension for a shorter amount of time.
How you plan to access your pension could affect your planning. For example, you’ll need to make sure you have other sources of income to fund your day-to-day expenses if you only plan on taking out a lump sum from your pension every now and again. And you might want to consider being able to take out a lump sum if you plan on helping a family member go to university or afford the deposit for their first home, for example.
Are you on track to receive the full new State Pension?
The State Pension is currently available for anyone over the age of 66. The state retirement age will increase to 67 in 2028 and 68 between 2037 and 2039.
To receive the full new State Pension (£230.25 per week) - you’ll need to have paid National Insurance for 35 years.
To receive the minimum State Pension (around £65 a week) - you’ll need to have paid National Insurance for 10 years.
You can check how much State Pension you’re on track to receive at GOV.UK.
If you haven’t made the required National Insurance contributions (NICs) to receive either the minimum or full new State Pension, you can make voluntary contributions to catch up.
Retirement planning checklist
Fancy a recap? Here’s how to plan for retirement in your 50s:
Check if you’re on track to receive a large enough pension - use the PLSA’s Retirement Living Standards to visualise the retirement lifestyle you’d like and how much income you’ll need to achieve it. Check your progress with our Pension Calculator and if you’re behind, consider ways you might be able to increase your contributions to catch up.
Consider consolidating your old pensions - your retirement savings could be easier to manage if you have just one pension to take care of. You’ll have a clearer understanding of how much your retirement savings are worth and may find it easier to manage your money. Consolidating your pensions could also save you from paying excess fees.
Check that you’re invested in an appropriate pension plan - not every pension plan is appropriate for everyone. So you’ll need to make sure your current plan is right for your current circumstances and future retirement goals. One of the most important considerations is the plan’s risk rating, especially as you get closer to retirement. For PensionBee customers, there are two default plans depending on your age - the 4Plus Plan and Global Leaders Plan.
Consider when you want to retire - you can retire from the age of 55 (rising to 57 from 2028), although many people choose to retire in their late 60s. You’ll need a much larger pension to retire early. If you’re not on track to have a large enough pension to retire at the age you’d like, you could consider making further contributions now or delaying your retirement age.
Consider how you want to receive a pension income - there are many ways of taking money from your pension, including drawing down a regular amount each month, taking out a lump sum when you need to, using your pension to buy an annuity, or doing a combination of all these things. Depending on which method you plan to choose, you might need to adjust your contributions or retirement age accordingly.
Check if you’re on track to receive the State Pension - so long as you’ve at least 10 years of NICs, you’ll receive the State Pension when you turn 66 (67 from 2028). But to receive the full new State Pension, you’ll need to have at least 35 years of NICs. If you’re behind, you can make voluntary contributions to catch up.
Risk warning
As always with investments, your capital is at risk. The value of your investment can go down as well as up, and you may get back less than you invest. This information should not be regarded as financial advice.
