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22 Aug 2024

How to plan for retirement

It pays to prepare for life after work – here's what you need to know

Paul Davies

Why do I need to plan for retirement?

Retirement planning has evolved rapidly over the last couple of decades. Fewer people enjoy the guaranteed income that comes with a final salary pension, and you now have to wait for longer to qualify for the state pension.

In short, having plenty of money in retirement is on your shoulders – so the more prepared you are, the better your retirement will be.

The good news is that there's lots of help that you can get to understand what's best for you:

Comprehensive free Which? guides on pensions and retirement
For Which? members (depending on your membership), one-to-one guidance from the Which? Money Helpline
Free guidance services such as Pension Wise
Professional financial advice

If you take out an annuity as a result of using the service from HUB Financial Solutions, Which? will earn a commission to help fund our not-for-profit mission.

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How do I plan for retirement at different ages?

The earlier you start planning for retirement, the more likely you are to build up adequate savings for the lifestyle you want when you stop working.

Real life, however, will often mean that this is easier said than done, as other financial commitments get in the way.

Here are some of the things you should be thinking about at certain ages.

What you need to know:

You'll be automatically enrolled into a pension by your company
You're required to pay in at least 5%
You can opt out - but it's not wise to do so. After all, you're getting free money from your employer

What you need to do:

Join your company pension scheme (and don't then opt out)
Sort out your debts - including clear your student overdraft
If you're self-employed, set up personal pension or a Lifetime Isa

What you need to know:

Having a baby won't affect your National Insurance contributions
Starting to build up your pension pot requires your attention
If you've switched jobs, your old pensions stay with your old employer

What you need to do:

Put away as much as possible - you can add more than your employer requires you too
Keep pension going despite other priorities (eg wedding, home, children)
Keep your pension savings invested in stocks and shares

What you need to know:

Some people in this age group may have a final salary pension, which pays a guaranteed income at retirement.
This could form a foundation of your pension income, so work out how much you need to have a comfortable retirement.
You have around 20 years until you reach retirement age.

What you need to do:

Check your state pension forecast to see how much you're on track to get
Assess the size of your pension pot and find out how the money is invested
Make sure you update old pension schemes with new contact details
Think about increasing contributions (make the most of pay rises and bonuses)
Consider opening a SIPP

What you need to know:

The state pension age is increasing
You can access personal pensions from the age of 55 (rising to 57 in 2028) - but this has consequences
Company schemes will start investing your pension is less risky investments, so growth may be lower
You can use some of your pension savings to pay for professional pensions advice

What you need to do:

Think when you might want to retire
Get another state pension forecast
Increase contributions if your earnings will allow
Consider the need to support grown-up children

How to plan for retirement checklist

Here's how to put yourself in the best position.

1. Get an idea how much your retirement income is likely to be

Your pension fund should be built up over your working life, but you may not have an idea how much you are on track to end up with.

Pension statements will indicate the annual retirement income likely to be generated by your final salary pension or the current size of your defined contribution plan.

Use our pension calculator to get an estimate of how much you will end up with.

2. Check your state pension

The rising state pension age (SPA) means that people are having to wait longer to get this government-provided income. However, once you do receive it the state pension can provide a major boost to your finances.

The full state pension (for those who reach state pension age on or after 6 April 2016) is worth £221.20 a week in 2024-25 (£11,502 a year), though the amount you receive depends on your National Insurance record.

A state pension forecast will help you to gauge how much you're on course to get from the government.

Find out more in our guide to how much state pension will I get?

Check your annuity options and compare across the whole market with HUB Financial Solutions. Find the best option for you.

3. Track your expenditure before you retire

Having a clear idea of what you spend your money on now will help you to plan for the longer-term.

Bear in mind you're likely to have less money to live on than when you were working, but you'll likely be spending less in certain areas (commuting to work, for example).

Find out more in our guide to how much will I need to retire?