The Government, following consultation, has now confirmed legislation on a significant change to how pensions will be treated for inheritance tax (IHT) purposes. 

From April 2027, most unused pension funds will count as part of a person’s estate when they die. This means that for the first time, inheritance tax may be due on pension pots left to loved ones. It marks a major shift in how pensions are used in estate planning and will have important consequences for those who had hoped to pass on their pension savings free of Inheritance tax.

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This will be of particular concern to those with larger pension pots or those who have been deliberately preserving their pensions to pass on their wealth. If that’s you, or someone in your family, it’s well worth taking time now to think about how to adapt your financial planning strategy. Speaking to your financial adviser will help clarify what steps you should take.

Who will be responsible for the reporting and payment of inheritance tax on unused pension funds?

Before consultation, the government proposed pension scheme administrators (PSAs) should both report and pay IHT on unused pension funds. After feedback following the consultation, the policy was changed so that personal representatives (i.e estate executors or administrators) will be responsible for reporting and paying IHT on unused pension funds - in line with standard inheritance tax procedures. Payment will be a joint and several liability with the beneficiaries, once death benefits are appointed to specific beneficiaries.

A new scheme will be established which will allow beneficiaries to request payment of IHT liabilities to HMRC directly from the pension fund (like the direct payment scheme), but the payment will be limited to liabilities due on pension funds and not the entirety of the estate. More details are awaited on the scheme. In addition, this change means that pension scheme administrators will be able to distribute benefits from the pension fund to beneficiaries before probate is obtained on the deceased's estate.

This does add a layer of administrative complexity post death and does mean that if you hold pensions benefits across a variety of different providers it could create a headache for your personal representatives and hinder speedy settlement of benefits. Where appropriate, consolidating existing pension pots during your lifetime into one provider will certainly help ease this process.  

Will my spouse or civil partner be subject to an IHT liability when inheriting my pension?

The scope of what types of pension benefits will be included in the new IHT regime has been confirmed and we now know that unused pension funds passed to a surviving spouse or civil partner will be exempt. Payments from death in service benefits, if you die whilst employed, are also exempt, even if they are written under a pension trust. Also scheme pensions paid from an occupational scheme to a surviving spouse or joint life annuities, where the income continues to be paid to a surviving spouse or civil partner, are also exempt.

Will beneficiaries face both inheritance tax and income tax on inherited pensions?

Potentially, yes. From April 2027, the value of the unused pension will form part of the estate for IHT purposes. If the deceased was aged 75 or over, any money their beneficiaries withdraw from the pension will also be subject to income tax. That means in some cases, the combination of inheritance tax and income tax could result in a significant chunk of the pension pot being lost to tax. In certain instances, the total tax take could reach as high as 67%.

Should people use their pensions during their lifetime instead?

It’s a question many will be asking. If a pension is likely to face inheritance tax when they die, does it make sense to start drawing from it now? The answer isn’t straightforward and needs to be considered on a case-by-case basis.  On the one hand, reducing your pension before death could lower the potential IHT liability. On the other hand, taking large withdrawals now might push you into a higher income tax bracket, especially if you’re still working or have retired with significant defined benefit pensions in payment. You’ll also need to think about whether you might need those funds later in life. Advice tailored to your specific requirements will be required to ensure that you make a fully informed decision in this regard.

Could annuities be part of the answer?

One option that may be worth considering is using part or all of your pension to buy an annuity. This turns your pension into a guaranteed income during your lifetime, which means there would be less left over in your pension pot to be subject to IHT post death.

Annuities aren’t for everyone, but they can, especially later in life, provide peace of mind and help reduce inheritance tax exposure at the same time. What’s more, annuity rates are generally higher for older individuals, which makes them potentially more attractive for clients aged 75 and over.

However, once again, suitability is down to your own individual circumstances and will require individual advice.  It should be noted that certain features which can be added to annuities are already subject to IHT e.g. guarantee periods and valuation protection payments, unless paid under discretionary powers.

Could insurance help cover the inheritance tax bill?

Another strategy might be to take out a whole of life insurance policy, written in Trust, designed specifically to cover the inheritance tax due on your pension. This means your beneficiaries effectively receive the full value of the pension, and the tax bill is paid separately from the insurance proceeds. You could even consider using pension withdrawals to fund the insurance premiums – although this too could trigger income tax, so it’s important to weigh up the costs and benefits carefully. It’s not a one-size-fits-all solution, but it could be worth exploring as part of a broader plan.

Family tax planning strategies

Planning as a family can make a real difference. For instance, if you have more income than you need to live on, you could potentially use the ‘normal expenditure out of income’ exemption to gift money each year without it being counted for inheritance tax. Children could then use those gifts to make their own pension contributions. If they’re higher rate taxpayers, they’ll also benefit from income tax relief over and above the basic rate relief received automatically at source.  In effect, this helps reclaim the tax you’ve paid on your pension income into tax-efficient savings for the next generation.

Coordinating this kind of plan with a solicitor ensures everything lines up with your will and long-term succession goals.  It will also be necessary to take specialist tax advice when seeking to use the ‘normal expenditure out of income’ exemption.  

Looking ahead

This change to inheritance tax on pensions is one of the most important shifts in estate planning in recent years. It brings pensions into line with other assets for tax purposes and will impact many families who had relied on them as a tax-free way to pass on wealth. While the new rules may feel like a blow, there are still a number of ways to plan effectively. Whether it’s exploring annuities, considering insurance, or using income to support family gifts, there are strategies available.

The key is to start planning now for 2027. Speaking to your financial adviser will help you understand the best course of action based on your age, pension size, and goals for your estate. With the right approach, it’s still possible to make your pension work hard for you and your family – both now and in the future.

If you’d like to learn more about how we can minimize the potential tax bill on your estate, why not get in touch for a free initial consultation.

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This article is for information only and does not constitute individual advice. The information provided in this article is based on the current allowances and legislation and is subject to change.

The Financial Conduct Authority (FCA) does not regulate trust or tax advice.

A pension is a long-term investment not normally accessible until age 55 (57 from April 2028 unless the plan has a protected pension age). The value of your investments (and any income from them) can down as well as up which would have an impact on the level of pension benefits available.  

Your pension income could also be affected by the interest rates at the time you take your benefits. The tax implications of pension withdrawals will be based on your individual circumstances, tax legislation and regulation which are subject to change. You should seek advice to understand your options at retirement.

Planning for retirement can be one of the most rewarding and reassuring steps you take for your financial future. One of the most common and important questions people ask when approaching retirement is: how long will my pension last? This question does not have a simple answer. It depends on a wide range of personal circumstances, financial goals, spending habits and, of course, how long you live. That is why it is essential to consider your unique situation carefully, and for many, professional financial advice can make a significant difference in ensuring peace of mind.

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How long will my pension pot last?

The longevity of your pension pot depends on a number of factors. The total value of your pension savings at retirement is only part of the equation. What also matters is how much you withdraw each year, whether your pension remains invested, the performance of those investments, and how inflation affects your spending power over time. Charges on your pension should also be considered as these will reduce the potential growth on your pension pot.

If, for example, you retire with a defined contribution pension, you have flexibility over how much to take and when. You may choose to draw a regular income, take lump sums, or buy an annuity. However, with flexibility comes responsibility. Withdrawing too much too soon, or not accounting for inflation, could mean your pot runs out earlier than planned. On the other hand, if you draw less than you need out of fear, you may find you are unnecessarily limiting your lifestyle.

This is where detailed financial forecasting becomes critical. Understanding how long your pension pot might realistically last under different scenarios requires a clear view of your spending needs and how those might change throughout retirement.

There is of course the option to secure a guaranteed income for life from a flexible defined contribution pot (an annuity), in which case this income would be paid for the rest of your life. The amount of income secured would be based on your age, health, value of the pension pot being exchanged and prevailing interest rates.

What is your life expectancy?  

A fundamental part of estimating how long your pension needs to last is understanding life expectancy. According to the Office for National Statistics, the average life expectancy in the UK is currently around 79 years for men and 83 years for women. However, it is important to remember that these are averages. Many people may live well beyond these ages, particularly if they reach retirement age in good health.

This uncertainty highlights the importance of planning for a potentially long retirement.  At The Private Office, cash flow planning plays a vital role. It is a method of mapping out your income and expenditure over time, using realistic assumptions about investment returns, inflation, and life expectancy. This modelling can help identify if your current pension savings are likely to be sufficient, and what adjustments may be needed to stay on track.

Factoring in a longer life expectancy than the average can be a prudent approach. After all, running out of money in later life can be one of the most significant risks to your financial security.

How much retirement income do you need?

Understanding how much you are likely to spend in retirement is another key consideration. The Retirement Living Standards, developed by the Pensions and Lifetime Savings Association (PLSA), offer a useful benchmark to help individuals gauge how much income they might need.

According to the latest figures, a single person needs around £14,400 a year for a ‘minimum’ standard of living in retirement. This covers all essentials, including food, utilities and some social activities.  

For a ‘moderate’ lifestyle, the figure rises to £31,300. This allows for more frequent meals out, holidays in Europe, and increased financial security.  

A ‘comfortable’ retirement requires around £43,100 a year, enabling more luxuries such as long-haul travel and regular leisure activities.

These figures help to put your own retirement aspirations into context. If you hope for a lifestyle closer to the moderate or comfortable standards, you will need to ensure your pension arrangements are sufficient to support that level of spending.

How long would a comfortable retirement income last?

Let us consider how long a pension pot might support a comfortable level of retirement income, as defined by the PLSA mentioned above. For a single person aiming to draw £43,100 a year, a pension pot of £500,000 may appear substantial. However, depending on how it is invested, the rate of withdrawal, and future inflation, it could run out in less than 15 years if withdrawals are not managed carefully.

If that same pension pot remains invested and generates returns over time, it may last longer. However, the likelihood is you’d need at least £800,000 or more to cover a comfortable retirement. To do this on a smaller pension pot you would need to introduce a greater level of investment risk, which would need to align to your appetite for risk and be suitably managed in retirement. Moreover, drawing from your pension during a period of poor market performance (known as sequence risk) can have a lasting negative impact on the sustainability of your income.

This illustrates why it is not just the size of your pension pot that matters, but how you draw income from it and how you manage risk. Professional advice can be invaluable in helping you model different scenarios, avoid common pitfalls, and make informed decisions.

The role of the state pension and other income

It is worth noting that your pension savings are unlikely to be your only source of income in retirement. For most people, the State Pension will provide a foundation. As of 2025, the full new State Pension pays just over £11900 per year. While this goes some way towards covering basic living costs, it is unlikely to support a moderate or comfortable retirement on its own. The state pension does however reduce the income requirement from your private pension provision, and in turn the level of pot you will require at outset.  It’s always worth noting that the age at which you can access the state pension is rising from 66 to 67 next year and gradually increasing to 68 between 2044 and 2046.

Other income sources such as workplace pensions, rental income, investments or part-time work can also play a part. When considered together, these income streams form a broader retirement income picture. Taking the time to understand how all these elements interact can help you build a more resilient retirement plan.

The value of planning ahead

Whether retirement is just around the corner or still a few years away, taking the time to plan ahead can provide you with confidence and financial security. Identifying your likely income needs and considering different income strategies can all help you feel more in control of your financial future.

Of course, these decisions are not always straightforward. Tax implications, investment risk, inflation and changing personal circumstances can all influence the outcome. This is why many people benefit from seeking professional financial advice. An experienced adviser can help you make informed choices, build a personalised retirement plan, and adjust it over time as life changes.

Ultimately, the question of how long your pension will last is not just about numbers. It is about your lifestyle, your goals, your peace of mind. With the right planning, and the right support, you can look to the future with greater confidence, knowing your retirement income is designed to last as long as you need it to.

If you’d like to learn more about how we can help you with the retirement you want, why not get in touch for a free initial consultation. 

Arrange your free initial consultation

This article is for information only and does not constitute individual advice. The information provided in this article is based on the current allowances and legislation and is subject to change.

The Financial Conduct Authority (FCA) does not regulate cash flow planning or tax advice.

A pension is a long-term investment not normally accessible until age 55 (57 from April 2028 unless the plan has a protected pension age). The value of your investments (and any income from them) can down as well as up which would have an impact on the level of pension benefits available.  

Your pension income could also be affected by the interest rates at the time you take your benefits. The tax implications of pension withdrawals will be based on your individual circumstances, tax legislation and regulation which are subject to change. You should seek advice to understand your options at retirement.

Retiring at 55 is an appealing prospect. Many people dream of stepping away from work while they’re still active enough to enjoy their newly afforded free time. But while the desire may be common, achieving it is something altogether more complex. Early retirement means giving up years of income and stretching your savings and investments over a longer retirement. For some, this can be done. For others, it may require a more nuanced approach.

So, what does retiring at 55 really take? And how do you know if it’s possible for you?

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How much do you need to retire at 55?

The answer to this depends on not just your retirement savings but also on the lifestyle you want to lead once you’ve stopped working. Recent figures from The Pensions and Lifetime Savings Association looked at average retirement income in a more lifestyle focused manner.  The groups are split into Minimum, Moderate and Comfortable with a single person varying between an income of £13,400 a year for a minimum retirement to £43,900 a year for a comfortable retirement. For a couple these figures varied from £21,600 to £60,600 respectively.

But retiring at 55 has many additional challenges. Unlike those retiring at state pension age, you may need to support yourself entirely from your own savings for at least 12 years or more, depending on when you qualify for the state pension to supplement your savings. The state pension is unlikely to cover all your needs. The full new state pension currently pays around £11,973 a year as of April 2025, provided you’ve paid at least 35 years of qualifying National Insurance contributions. Until then, your private pension, ISAs, savings, or other investments will need to do all the heavy lifting.

Can I afford to retire at 55?

You may already have a decent pension pot and additional investments. You may own your home outright or have other sources of income, such as rental property. But even with a solid base, it’s vital to understand whether your money will last.

One of the common challenges early retirees face is the temptation to draw too much too soon. The earlier you access your pension, the longer it needs to last – and the more vulnerable it becomes to poor investment performance or inflation. If you withdraw too aggressively during a market downturn, you risk depleting your pot much faster than expected. This is known as sequencing risk and you can read more about it here.

There’s also the issue of timing. From 2028, the minimum age for accessing defined contribution pensions will rise from 55 to 57, unless you have any existing pension age protections in place. If you turn 55 after this point, your earliest retirement date may be later than you expect. And if you were planning to use your pension as your main income source, this could impact your strategy.

It's worth considering whether full retirement is even what you really want. Semi-retirement, perhaps reducing your hours, freelancing or consulting, can give you more flexibility.

Use our retirement calculator

No one has a crystal ball. But what you do have is a range of tools that can help you understand whether your plans are on track. Our retirement calculator is one of the most useful, especially if you’re hoping to retire at 55.

By inputting your current savings, your target retirement age, and the income you’d like to receive, our retirement calculator can provide an estimate of how long your money might last – and what you’d need to contribute to reach your goal.

Retirement Calculator

A useful tool to get a basic understanding of what your future retirement plans look like is our retirement calculator. From your own personal circumstances , you will be able to forecast an estimate of the pension income you will get when you retire and receive a target retirement income to aim for based on your choices.  

It’s important to remember that these tools are only as accurate as the assumptions they’re based on. Investment growth, inflation, life expectancy and future tax rules are all variables. But using a calculator is an excellent way to create a picture of what your retirement might look like – and how close you are to achieving it. This is not guaranteed and is for illustrative purposes only.

How to really look into your financial future

While calculators give you a high-level snapshot, cash flow forecasting takes your planning a step further. It is a more personalised approach that helps model your financial future in detail.

A cash flow forecast looks at all aspects of your income, spending and assets, both now and in retirement. It takes into account your savings, pensions, investments, property, and any planned large expenses, like helping children with a house deposit or taking a round-the-world trip.

What makes it powerful is that it’s dynamic. With the help of your financial planner, you can run scenarios to see how your financial position changes if you retire earlier, downsize your home, delay your state pension, or take lump sums from your pension. You can also test the impact of market downturns, inflation spikes, or a longer-than-expected retirement.

This kind of planning gives you greater confidence in your decisions. Rather than relying on rules of thumb, you can understand exactly what is affordable – and what changes might be needed to get there.

At The Private Office, we believe cash flow forecasting is a key part of any long-term financial strategy. It provides a visual projection of your financial life, highlighting when and where gaps might arise and helping you take action early to avoid them.

Pension drawdown or annuity – which is best for early retirees?

If you’re planning to retire at 55, it’s likely you’ll be managing your pension using drawdown rather than buying an annuity. Drawdown allows you to keep your pension invested while taking income as needed. This offers more flexibility, especially for those who expect their income needs to change over time.

However, it also means more responsibility. You’ll need to keep an eye on investment performance, monitor your spending, and ensure your pot lasts. For some, this can be daunting, and this is where advice becomes so valuable.

Annuities, on the other hand, offer peace of mind through guaranteed income for life in exchange for flexible access to a ‘pot of money’. But if you buy one at 55, the rates are generally much lower than if you wait until your 60s or later. For that reason, many early retirees opt to draw down first, possibly considering an annuity later on when the rates become more attractive or even a combination of the two later in life.

Is early retirement realistic for you?

For some people, retiring at 55 is entirely realistic. For others, it might require adjustments to spending, saving more in the years ahead, or even considering part-time work to bridge the gap.

What’s most important is having a plan. That plan should be based on careful analysis, not guesswork. It should be flexible enough to adjust when life changes. And it should take account of your goals and values, not just the numbers.

Seeking financial advice can play a critical role here. We can help you define your goals, assess your current position and build a strategy that puts you on the right path, whether that means retiring at 55, or simply retiring with confidence, whenever the time is right for you.

We’re currently offering those with £100,000 or more in cash, investments or defined contribution pensions a free cash flow forecast review worth £500. For more information why not get in touch.

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This article is intended for general information only, it does not constitute individual advice and should not be used to inform financial decisions. 

The Financial Conduct Authority (FCA) does not regulate cash flow planning or tax advice. 

A pension is a long-term investment not normally accessible until age 55 (57 from April 2028 unless the plan has a protected pension age). The value of your investments (and any income from them) can down as well as up which would have an impact on the level of pension benefits available.  

Your pension income could also be affected by the interest rates at the time you take your benefits. The tax implications of pension withdrawals will be based on your individual circumstances, tax legislation and regulation which are subject to change. You should seek advice to understand your options at retirement.

According to the latest figures from The Office for Budget Responsibility (OBR), the state pension triple lock is forecasted to cost the government three times more than the original estimate by 2030, with the annual cost of the triple lock policy potentially reaching £15.5bn.  

In response to the report, the government said it was "committed" to the current policy.

"We are committed to supporting pensioners and giving them the dignity and security they deserve in retirement", a Treasury spokesperson said.

However, the OBR stated the UK's public finances were in a "relatively vulnerable position" owing to pressure from recent government U-turns on planned spending cuts.

Despite the assurances, speculation is rife about the possibility of a triple lock rollback, especially following the recent rumours and speculations around Rachel Reeves’s plans to cut the Cash ISA in her upcoming Mansion House speech on 14th July 2025.  

The cost of the state pension has risen steadily over the past eight decades, from around 2% of  UK GDP  to a current 5%, equating to £138bn, and is forecast to increase to 7.7% of the economy by the early 2070s. According to the OBR, spending on the state pension has gradually been creeping up as an ever increasing proportion of people are living longer and above the state pension age in the UK.  

In an effort to counter this, not only is the triple lock under threat of being changed or even scrapped, but The Department for Work and Pensions (DWP) recently confirmed that the state pension age will increase from 2026 with the change being gradually introduced over a year in an effort to reduce the proportion of people receiving state pension.

At present both men and women are eligible to claim the state pension upon reaching 66, but from next year this age will rise to 67.

The ‘triple lock’ explained

The pension ‘triple lock’ refers to a well-known state pensions policy that ensures state pensions rise every year by either the average earnings growth, inflation (as measured by the Consumer Prices Index) or a flat 2.5% - whichever is highest that year, hence the name ‘triple’ lock.  

It was designed in principle to make sure that state pension value would always have the best growth outcome each year for tax payers. The guarantee that the highest of the three will be what pensions grow against ensures that pensioners have three layers of protection against inflation, hence the name ‘triple lock’. This is incredibly important in maintaining a level of healthy financial security for those relying on their pensions, as it guarantees growth irrespective of how volatile the economy becomes.

With the triple lock potentially under threat and the state pension age on the rise, it’s more important than ever to manage your retirement plans carefully to ensure you don’t get caught out. If you want to find out more about how you can plan ahead and navigate these changes, why not give us a call on 0333 323 9065 or book a free non-committal initial consultation with one of our chartered advisers to find out how we might be able to help you. 

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This article is intended for general information only, it does not constitute individual advice and should not be used to inform financial decisions. 

The Financial Conduct Authority (FCA) does not regulate cash or tax advice. 

When thinking about retirement, many people focus on how much they’ve saved. But just as important is how that money is invested. Pension investment funds play a vital role in shaping the lifestyle you will enjoy in your later years. Making the right decisions today could mean the difference between just getting by and living comfortably throughout retirement. If you are unsure where to begin, understanding your options and how they align with your personal goals is a key first step.

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Making sense of your options

Navigating the landscape of pension investment funds can feel overwhelming. With thousands of funds available, including active and passive strategies, thematic investments, ethical funds and more, the choice is vast. Selecting the most suitable pension investment funds will depend on your unique circumstances, and no single option is right for everyone.

Some investors prefer actively managed funds, where managers hand-pick investments with the aim of outperforming the market and minimising losses with the potential to make a higher return than the average. Others might choose passive funds, which track an index or market rather than trying to beat it and tend to have lower costs. Each approach has its merits, and in many cases a blend of both can be appropriate.

No matter how you choose to invest, the key is to ensure your pension is not left on autopilot. Markets evolve, economic conditions shift, and your personal situation will change over time. Keeping your pension aligned with these developments is essential to giving yourself the best chance of a financially secure retirement.

What is your attitude to risk?

Before deciding where to invest your pension fund, it’s crucial to understand your attitude to risk. Everyone has a different threshold. Some people are more comfortable with the ups and downs of markets, while others prefer the relative stability of more conservative investments.

Your tolerance for risk may depend on a number of factors, including how long you have until retirement, your wider financial situation, and your personal experiences. If you are younger and still several decades away from retirement, you may feel comfortable taking on more risk in exchange for the potential of higher returns. As you get closer to accessing your pension, you may prefer to reduce your exposure to volatility.

When considering risk, it’s important to take emotion out of the equation. Emotional investing, where decisions are driven by fear, anxiety or overconfidence, often leads to poor outcomes. Market fluctuations can tempt investors to make impulsive changes, such as selling during downturns or chasing returns during rallies. These reactions can often do more harm than good. A well-thought-out strategy that matches your true risk tolerance and overarching financial plan will serve you far better than one driven by how markets make you feel at any given moment. Removing emotion helps you stay focused on your long-term objectives and avoid knee-jerk reactions that could undermine your retirement goals.

Investment risk in pension fund portfolios is largely unavoidable, but it can be managed. By aligning your investment choices with your risk profile and timescales, you can create a more resilient pension plan. Speaking to a financial adviser can help to determine an appropriate risk profile and strategy and empower you to make confident decisions that suit your needs.

Where are your pension savings currently invested?

Many people are unaware of where their pension savings are actually invested. If you are enrolled in a defined contribution pension scheme, your contributions, along with those from your employer, are invested in pension funds. These can include a mix of equities, bonds, commodities, property and cash.

A suitable pension investment fund would typically be diversified across different regions and asset types to help reduce the impact of any single area performing poorly. You may already be in a default lifestyle fund, which gradually shifts your investments to lower-risk options as you approach retirement. Whilst seemingly convenient, it’s worth reviewing if this strategy is truly the right fit for your specific goals, timescales and prevailing market conditions.

Looking into where your pension is invested can reveal opportunities to improve potential outcomes. If your current fund has not performed in line with similar alternatives, or if the risk profile does not suit your current circumstances, it may be time to explore other options.

How you plan to take your pension

How you intend to draw on your pension in retirement may have a significant influence on how it should be invested now and in the glidepath towards retirement Some people will want to take a tax-free lump sum and buy an annuity, which guarantees an income for life but offers limited flexibility. Others might prefer pension drawdown, which allows you to keep your pension invested and flexibly withdraw income as needed.

Each of these options carries different levels of investment risk and potential reward. An annuity typically removes investment risk altogether but might provide a lower income, particularly when interest rates are low. Drawdown keeps your pension exposed to the market, offering the possibility of capital growth even in retirement, but with the risk of loss if markets or investments perform poorly.

By understanding your likely income needs and how flexible you want your retirement income to be, you can better match your pension investments to your plans. Receiving professional advice on the options and considerations can be extremely valuable, as the decisions you make now may have lasting consequences.

When do you plan to access your pension?

Your investment choices should take into account the time horizon until you need to start drawing on your pension. If retirement is 20 or 30 years away, you may consider a growth-oriented strategy, as the longer-term time horizon allows you to ride out short-term fluctuations. For those closer to retirement, capital preservation becomes more of a priority.

Timing also affects your exposure to investment risk. Markets and investments may perform unfavourably at the point you begin to withdraw income. If your portfolio suffers a decline just before or during the early years of retirement, the impact on your overall pension pot can be significant.

This is referred to as “sequencing risk” and highlights the importance of reviewing your pension strategy regularly and creating a financial plan. A carefully managed transition from higher to lower risk assets, known as de-risking, is often used to address this concern. Some pension funds do this automatically, but it is not always tailored to your specific plans.

The sooner you engage the better

Deciding where to invest your pension funds is not something to put off until the future. The sooner you engage with the options available, the more control you can have over your financial future. Understanding your attitude to risk, the structure of your pension plan, and how and when you expect to retire are all crucial to making informed choices.

Whether you are seeking long-term growth or greater stability as you approach retirement, there are solutions available. The challenge is identifying what is right for you. Exploring where to invest your pension fund and reviewing the investment risk and suitability of the current strategy should be a regular part of your financial planning.

Speaking to an independent financial adviser can help you gain clarity, avoid common pitfalls and put in place a strategy that evolves as your life does. It is never too early or too late to take control of your pension. The future you want could depend on the actions you take today.

Arrange your free initial consultation

This article is intended for general information only, it does not constitute individual advice and should not be used to inform financial decisions. 

The Financial Conduct Authority (FCA) does not regulate cash or tax advice. 

A pension is a long-term investment not normally accessible until age 55 (57 from April 2028 unless the plan has a protected pension age). The value of your investments (and any income from them) can down as well as up which would have an impact on the level of pension benefits available.  

Your pension income could also be affected by the interest rates at the time you take your benefits. The tax implications of pension withdrawals will be based on your individual circumstances, tax legislation and regulation which are subject to change. You should seek advice to understand your options at retirement.

Over the past few years, millions of people across the UK have found themselves quietly paying more tax, even if they haven’t seen a single change to their tax rate. This subtle yet powerful shift in the nation’s tax landscape has not been driven by headline-grabbing announcements, but rather by what are commonly referred to as “stealth taxes.” These measures raise government revenue not through overt rate increases, but via frozen thresholds and shrinking allowances, often going unnoticed until the financial pinch begins.

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A surge in pensioners paying higher tax

New figures obtained from HM Revenue and Customs under the Freedom of Information Act reveal just how widespread this issue has become. According to Steve Webb, former Pensions Minister, the number of pensioners now paying income tax at the higher (40%) or additional (45%) rates has more than doubled in just four years. In 2021/22, around 494,000 pensioners were affected; today, that number has surpassed one million.
Even more revealing is the total number of pensioners paying income tax at any level. This has risen from 6.7 million to 8.8 million over the same period, an increase of nearly a third. This is not due to tax rate hikes, but instead to frozen thresholds and rising pension income pushing more retirees into tax-paying brackets.

How fiscal drag is quietly hitting retirees

At the heart of this trend is a phenomenon known as “fiscal drag.” This occurs when tax thresholds remain static while incomes, particularly pensions, increase with inflation. The personal allowance and higher-rate threshold have both been frozen since 2021 and are expected to remain frozen until 2028. During this time, state and private pensions have risen, mainly due to inflation and the government's commitment to the triple lock.
From April 2025, the full new state pension rose to £11,973, just below the £12,570 personal allowance. This means that for anyone with a modest workplace or private pension on top of their state entitlement, paying income tax has become the norm rather than the exception.

More than just Income Tax

Crossing into higher-rate tax bands doesn’t just mean paying more on income, it also has knock-on effects for other allowances. For instance:
•    The Personal Savings Allowance is halved from £1,000 to £500 for higher-rate taxpayers.
•    The Dividend Allowance has been reduced in recent years, currently sitting at just £500 (down from £2,000 in 2022).
•    The Capital Gains Tax exemption was halved to £3,000 from April 2024, falling from a high of £12,300 in 2022/23 tax year.
For those crossing into the additional rate tax band (which was lowered from £150,000 to £125,140 in 2023/24) these allowances are cut even more sharply. In the case of savings interest, the Personal Savings Allowance is removed entirely.

Rising Tax bills for savers and investors

Stealth taxation is not just affecting pensioners. The Personal Savings Allowance has remained unchanged since it was introduced in 2016. For years, with ultra-low interest rates, this wasn't a major issue. But the tide has turned.
With the Bank of England increasing interest rates to tackle inflation, savings accounts are now generating more interest and more tax. In the 2022/23 tax year, 1.77 million people paid tax on their savings interest, up from just 970,000 the year before. HMRC reports that the amount raised from this alone more than doubled from £1.2 billion to £3.4 billion.
In the 2023/24 tax year, an estimated 1.9 million people paid tax on their savings interest, up from 1.77 million the year before and just 970,000 in 2021/22. According to HMRC the amount raised from tax on savings interest surged to a record £9.1 billion, more than double the £3.4 billion collected in 2022/23, and over seven times the £1.2 billion from 2021/22. Projections for 2024/25 suggest that over 2 million savers will pay tax on interest, with HMRC expecting to collect £10.4 billion.

A Growing Inheritance Tax catch

Another stealth tax that continues to ensnare more households is Inheritance Tax (IHT). The nil-rate band for IHT has been frozen at £325,000 since 2009. Over this time, property and asset values have risen dramatically. As a result, more estates now breach the threshold and face IHT liabilities. Although, in 2017 the Residence Nil Rate Band was introduced which permitted individuals, passing down their main residence to direct descendants, an additional allowance of up to £175,000. Meaning, for married couples/ civil partnerships up to £1million could be passed down free of IHT. However, those estates of over £2 million would be subject to tapering. You can read more about this here.

In 2024/25, IHT receipts hit a record £8.2 billion. With the freeze extended until at least 2030 and no indication of major reform, families are increasingly vulnerable to unexpected tax bills, even those with relatively modest estates.

What can be done? The case for proactive planning

While stealth taxes are largely outside of our control, their impact doesn’t have to be. With careful planning, it’s possible to reduce unnecessary tax exposure and protect long-term wealth. Strategies may include:

• Making full use of ISAs for tax-free savings and investments
• Structuring pension drawdowns to minimise tax liabilities
• Gifting assets in a tax-efficient manner to reduce IHT exposure
• Reviewing income regularly to avoid crossing thresholds unnecessarily
• Increasing pension contributions to lower taxable income through salary sacrifice.

Each individual’s situation is different, and the tax system is becoming increasingly complex. For many, professional advice can help clarify their position and create a clear, forward-looking financial strategy.

60% tax trap

For those earning between £100,000 and £125,140, the tax system becomes especially punitive. In this income band, individuals lose £1 of their tax-free personal allowance for every £2 earned above £100,000, effectively creating a 60% marginal tax rate. This stealthy threshold has increasingly drawn in middle- and upper-middle earners, particularly as it hasn’t been adjusted for inflation since 2010. Despite rising wages and fiscal drag, the government has so far resisted reform, leaving many professionals facing disproportionately high tax bills.

Staying ahead in a shifting tax landscape

As the government continues to rely on threshold freezes to raise revenue without increasing tax rates, more households, particularly pensioners, will feel the squeeze. These are not sudden shocks, but slow, creeping changes that can significantly erode financial wellbeing over time.

Understanding the full picture and taking early, informed action is key. Whether you are drawing a pension, managing savings, or planning your estate, speaking with a qualified financial adviser can help you navigate the challenges ahead and ensure your finances remain aligned with your goals.

If you’re concerned about an increasing tax burden on your wealth why not get in touch and speak to one of our financial advisers to see how we can help.

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This article is intended for general information only, it does not constitute individual advice and should not be used to inform financial decisions.

The Financial Conduct Authority (FCA) does not regulate estate planning or tax advice.

The information in this article is based on current laws and regulations which are subject to change as at future legislations.

A pension is a long-term investment. The value of an investment and the income from it could go down as well as up. The return at the end of the investment period is not guaranteed and you may get back less than you originally invested.

On face value the question of ‘what is the average’ is a simple one, the answer is £595 per week (£30,940 p.a.) for a retired couple and £282 per week (£14,664 p.a.) for a single retiree as per the most up to date Government Pensioners’ Income figures.

However, these figures do not take into account that everyone’s retirement looks different and so the question of ‘what is the average retirement income in the UK’ shouldn’t be boiled down to a static annual figure and should be looked upon through a more personal lens - by its nature, an average will not be the right amount for everyone.

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Retirement Living Standards in the UK 

The Pensions and Lifetime Savings Association have conducted a study using independent research provided by Loughborough University which looks into Retirement Living Standards in the UK. The study looks at average retirement income in a more lifestyle focused manner by outlining examples of what specific retirement income groups could look like in more tangible ways. The groups are split into Minimum, Moderate and Comfortable and can be seen below for both single retirees and couples.

Figure 1 - Types of expenditure - Single, Source: Pensions and Lifetime Savings Association, 2025

Figure 2 - Types of expenditure - Couple, Source: Pensions and Lifetime Savings Association, 2025

*The figures shown are the amounts of annual expenditure required to achieve the living standard (ie they are not gross income figures).

These tables suggest possible lifestyles which could be achieved at different levels of income in retirement. Although this is an attempt to address the average retirement income through real world examples of expenditure, the truth is that retirement income is subjective and truly depends on the individual’s circumstances and desires.  

Retirement income has become a bigger personal concern, especially in today’s environment of rising living costs and unpredictable investment markets. Everyone is feeling the pressure on their standard of living, but it’s especially challenging for those who are nearing or already in retirement. Those who are used to living a ‘comfortable’ retirement may now be in a position more aligned to a ‘moderate’ retirement. 

What is the average retirement income for a single person? 

As shown in the table above, the amount that needs to be saved for retirement depends on the lifestyle you want to achieve. For a single person, this varies from an income of £13,400 a year for a minimum retirement to £43,900 a year for a comfortable retirement. These figures are just estimates, intended to give you an idea of the kind of lifestyle you might expect with each level of retirement income. 

What is the average income for a retired couple? 

The figures for a retired couple start at £21,600 and rise to £60,600, according to the Retirement Living Standards tables, with £44,900 considered ‘moderate’. 

Whether you are a couple or single, there are additional factors that can impact the level of income you may need. For instance, those with dependents may have further financial commitments and a different lifestyle to those with no dependents.

How much income do I need in retirement? 

For many people, private and state pensions could go a long way to building up retirement income. The full state pension for 2025/26 is £11,973 per year. Additionally, adopting the right tax-efficient strategy for your situation could make all the difference.  It could be that different pots of savings and pensions are drawn down on at different stages to get your target income to fund the lifestyle you are looking for. Everyone's “need” in retirement will be different, but it should be reflective of what is achievable and affordable within the savings and pensions you have amassed. 

The key to peace of mind and a stress-free retirement is planning. Planning allows you to spend the money you have saved without fear that you’ll run out. Knowing how much you’ll need and how long your money will last as well as how much you can afford to spend is vital. That switch from using income to build capital to using capital to provide income can be daunting.

It’s essential to make sure you plan as early as you can, to forecast if the money and assets you have set aside for your retirement will be enough to see you through.  At TPO we use a tool called Cash Flow Forecasting. It gives you control over your finances so you can live comfortably now, be prepared for unexpected expenses or changes in circumstances, and still have a secure future to look forward to.

Retirement Calculator

A useful tool to get a basic understanding of this is our retirement calculator. From your own inputs, you will be able to forecast an estimate of the pension income you will get when you retire and receive a target retirement income to aim for based on your choices, taking into account your salary. 

How to increase your retirement income 

Increasing your retirement income is certainly achievable with appropriate planning and foresight; we are massively incentivised by the government to save for retirement through the tax relief on pension contributions and the legal obligation for your employer to pay into a workplace scheme. Taking advantage of these reliefs and putting money aside as early as possible for your retirement can have a real tangible impact on your retirement income. 

Additionally, pension funding is the only allowance which can be backdated for up to three tax years, known as 'Carry Forward' rule, this means any of your unused allowance from previous tax years can be brought forward and invested into your pension.

Furthermore, to fund whatever retirement income your lifestyle needs, you don’t need to solely rely on pension savings and the State Pensions. ISAs, cash and other investment vehicles can also be used to fund your retirement. ISAs are particularly useful with their tax-free status, allowing you to draw tax free income when you need it. 

We are lucky that we now have more information and more choice on how we plan for the future. A good starting point is to try and envisage what a good retirement will look like you for. This will in turn enable you to ensure you are maximising the relief and allowances which are inherently designed to increase the level of retirement income you can enjoy. Starting retirement saving late shouldn’t be disregarded, as any effort to put away money can have a noticeable difference and impact the retirement you can look forward too. 

How does the average retirement income compare to average earnings?

Pre-retirement expenditure needs can vastly differ from your income requirements in retirement. The mean average salary for full-time workers in the UK (male and female) in 2024, according to the Office for National Statistics was £45,836 p.a. As we have investigated, this is significantly higher than the average retirement income for a single individual of £14,664 p.a.

In retirement people often face different expenses compared to their working years. While some costs like commuting may decrease, healthcare and long-term care costs can rise. Furthermore, one of the largest outgoings individuals face whilst working is mortgages - retirees will generally have paid off their mortgage liability as they begin to transition towards their sources of retirement income to fund their lifestyle. Therefore, the income needed in retirement will inevitably differ from working years.

A standard measure that can be used to assess retirement needs is the replacement ratio, which is the percentage of pre-retirement income that is replaced by retirement income. As a rule of thumb, most people may need to replace between 60%-80% of their pre-retirement household income, before tax, in order to maintain their lifestyle in retirement. However, the average retirement income is far lower than 60% of the average income for full-time workers in the UK (60% of £45,836 is £27,502). Therefore, this serves to reinforce the notion that retirement income is circumstantial for each individual, depending on their unique needs and objectives. T

How we can help 

Retirement is personal and not just as straightforward as an average number given to you. 
By considering what your retirement might look like in advance, you can plan, utilise allowances and the tax reliefs granted to you by the government to build your wealth, which you can later draw on to fund your retirement. 

Here at TPO we use cash flow modelling to visualise your retirement and track the progress towards your goals. This process maps out your financial future and shows you the difference even small changes can make. We will assist you in constructing a tax-efficient strategy to achieve the level of retirement income you hope to gain. If you would like to have an initial free consultation to discuss your retirement plan, please get in touch.

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Please Note: The value of investments can fall as well as rise.  You may not get back what you invest. The Financial Conduct Authority (FCA) do not regulate estate or cash flow planning, or tax advice.

Managing your finances can often feel straightforward, particularly when it comes to day-to-day budgeting or saving for short-term goals. But some financial decisions carry long-term consequences that are far from simple. In these instances, the stakes are higher, the options more complex, and the implications far-reaching - not just for you, but for your family too. These are the moments when seeking professional financial advice is not just sensible but crucial.

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Advice on estate planning

Gifting Property to Your Children:

One of the most common motivations for gifting property is to help children onto the housing ladder or to reduce the value of an estate for inheritance tax purposes. However, this seemingly generous act can trigger unexpected tax complications and financial risks if not handled carefully.

Transferring ownership of a property can have implications for capital gains tax, especially if it is not your main residence. When considering inheritance tax, if you gift a property that is worth more than your Nil Rate Band (NRB) or joint NRB (or joint owners, usually both parents) then if you pass away within 7 years, the beneficiary of the house is liable to pay the 40% inheritance on the value of the gift above the NRB. This provides complications to the beneficiary as they may be forced to sell the property or have to set up a regular arrangement with HMRC to pay the inheritance tax due.

In addition, should you continue to live in the property after gifting it, you may fall foul of the “gift with reservation” rules, which mean that HMRC could still treat the property as part of your estate for inheritance tax purposes.

Moreover, giving away significant assets could impact your financial security in later life. Once a property is legally transferred, you lose control over it. This can be detrimental to your later life planning such as paying for care costs. If your child were to go through divorce, bankruptcy, or pass away unexpectedly, that property could become part of a legal or financial settlement. These are difficult possibilities to consider, but failing to plan for them could create avoidable hardship.

Seeking financial advice can provide you with peace of mind when gifting away assets, ensuring that they are absolutely surplus to your requirements and allow you to plan appropriately.

Passing on wealth:

Estate planning goes far beyond writing a will. It involves a careful review of your assets, liabilities and how best to pass on wealth to future generations in a tax-efficient manner. Inheritance tax, currently charged at 40 per cent on estates over £325,000 per individual, can significantly reduce the value passed to your heirs if not planned for in advance. Also, for those passing down their main residence to direct descendants, an additional £175,000 Residence Nil Rate Bands (RNRB) per individual is available (on net estates valued up to £2 million), meaning up to £500,000 for an individual or £1 million for married couples/civil partners could be passed down free of inheritance tax.

A direct descendant is classified as your spouse/civil partner, children (adopted, fostered and stepchildren) and grandchildren.

From making use of available allowances and reliefs, to setting up trusts or using life insurance to cover tax liabilities, there are many tools available to reduce the impact of inheritance tax. Missteps can lead to unintended tax bills, loss of asset control, or disputes among beneficiaries.

Advice using equity release

Equity release has become an increasingly popular option for those seeking to unlock the value in their home without selling it. Whether you're looking to supplement your pension income, fund home improvements, or gift money to family, releasing equity can be appealing. It’s even an option for some with large estates looking to lower the value of their estate for inheritance tax purposes. However, it's not a decision to take lightly.

Equity release products, such as lifetime mortgages, can have long-term financial consequences. While you do not need to make monthly repayments, interest is typically rolled up and added to the loan, which can significantly reduce the value of your estate over time. If not for the intended purpose of lowering your estate, this may impact what you are able to leave behind for your loved ones and could also affect your eligibility for means-tested benefits. In order to have maximum benefit from a lifetime mortgage for inheritance tax (IHT) your estate needs to be more than the sum of the NRB and RNRB.

It is essential to assess your overall financial situation to decide whether equity release is the right fit, or if there are more appropriate alternatives available.

Advice on planning for retirement and managing pensions

Pension planning is another key area where financial advice can make a substantial difference. For many, pensions represent the most significant savings pot outside of property, yet they are often misunderstood or neglected. As retirement approaches, knowing how to draw down your pension in the most tax-efficient way becomes increasingly important.

There are several options available when accessing your pension, including taking a tax free lump sum, setting up drawdown arrangements, or purchasing an annuity. Each comes with its own set of implications for tax, investment performance, and long-term income security. Without clear guidance, it’s easy to make choices that could result in paying more tax than necessary or even running out of money later in life.

Financial advice is particularly important when consolidating multiple pensions, especially if you are considering transferring your defined benefit schemes to a drawdown arrangement or the current scheme provides guaranteed income features such a Guaranteed Minimum Pension (GMP) benefit. It’s vital to evaluate the advantages and disadvantages of consolidation and help you build a sustainable income plan for your retirement years.

Advice on understanding the value of cash in retirement

In retirement planning, maintaining a cash reserve is crucial to safeguard your financial future, especially when facing market volatility. This strategy helps manage ‘sequencing risk’.

Sequencing risk is the risk of receiving lower or negative returns early on in your retirement due to market downturns when you begin drawing an income from your investments. The negative impacts of sequencing risk can have the effect of eroding your savings at a faster rate and can potentially increase the chances of running out of money.   
Holding a cash reserve equivalent to one to three years' worth of living expenses provides a buffer during market downturns. Instead of selling investments at a loss, you can draw from your cash reserves, allowing your investment portfolio time to recover. This approach helps preserve the longevity of your retirement savings.

Making the most of what you have

Life is full of financial crossroads - some expected, others less so. Selling a business, receiving an inheritance, going through a divorce, or receiving a medical diagnosis can all bring sudden and significant changes. In times like these, a financial adviser can act as both a guide and a steady hand, helping you navigate uncertainty with confidence.

Even if you’re not facing a major life event, periodic check-ins with a financial adviser can help ensure you remain on track toward your goals. Whether you're planning for retirement, helping your children financially, or simply looking to make smarter investment decisions, the right advice can help you make the most of what you have.

At its core, financial planning is not just about numbers. It’s about peace of mind, protecting your loved ones, and creating the future you want to see. For the decisions that matter most, getting expert advice can be one of the most valuable investments you make.

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This article is intended for general information only, it does not constitute individual advice and should not be used to inform financial decisions.

Levels, bases and reliefs from taxation may be subject to change.

Using equity on your home will affect the amount you are able to leave as an inheritance. Any means tested state benefits (both current and future) may be affected by any equity released. This is a lifetime mortgage. To understand the features and risks, ask for a personalised illustration.

A pension is a long-term investment. The fund value may fluctuate and can go down. Your eventual income may depend on the size of the fund at retirement, future interest rates and tax legislation.

The Financial Conduct Authority (FCA) do not regulate estate, cash flow planning, will writing or tax and trust advice.

When it comes to preparing for retirement, your pension is likely to be one of the most valuable financial assets you have. Yet, despite its importance, many people make costly errors when managing their pension savings -mistakes that can have lasting consequences on their financial wellbeing in later life. With increasing responsibility placed on individuals to navigate complex pension rules, it’s more important than ever to make informed decisions.

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1. Not saving enough during your working life 

One of the most common missteps is not saving enough in the first place. While auto-enrolment has brought millions of UK workers into workplace pensions, many contribute only the minimum amount required. Typically, this is 8% of your qualifying earnings split between employer and employee, but this may not be enough to fund the kind of retirement you’re hoping for.

A comfortable retirement often requires more than the minimum, and yet many workers never increase their contributions, even when their circumstances improve. Delaying pension saving or pausing contributions, even for a short period, can also have a disproportionately large effect on your final pension pot due to the compounding effect of long-term investment returns.

2. Consolidating without checking the small print

Pension consolidation itself can be both a solution and a problem, depending on how it’s done. Bringing together multiple pots can help you keep track of your savings and possibly reduce overall charges. However, some older pensions may come with valuable benefits, such as guaranteed annuity rates or protected tax-free cash, which can be lost if transferred. It's essential to understand what you're giving up before making any decisions.

3. Ignoring the impact of charges

Overlooking the impact of charges is another critical mistake. Charges on pensions might seem small, but over time they can eat away at your savings. Workplace pensions tend to have lower fees, often under 0.5% annually, due to charge caps on default funds. However, those who decide to transfer their pension into a Self-Invested Personal Pension (SIPP) or another non-workplace scheme may end up paying much more, sometimes more than 1% per year in management fees.

While these products can offer more control and investment choice, the higher costs can reduce your returns significantly. Before consolidating or transferring pensions, it’s important to weigh the benefits of simplicity and potential performance against the cost of higher fees.

4. Accessing your pension too early

Another pitfall is accessing your pension too early. While pension freedoms introduced in 2015 give you more flexibility, just because you can access your pension from age 55 (rising to 57 in 2028), it doesn’t mean you should. Many are tempted to dip into their pension pot to fund large purchases, help children financially, or simply to enjoy a bit of financial freedom.

However, withdrawing money early means missing out on years of potential investment growth and compounding, which can significantly reduce the size of your eventual retirement fund. Moreover, accessing your pension too soon could result in a pension pot that doesn’t last as long as you do, leading to financial insecurity in your later years.

5. Paying unnecessary tax on withdrawals

Tax is another area where pension savers often get it wrong. Taking large lump sums in one go can inadvertently push you into a higher income tax bracket. For instance, only the first 25% of your pension withdrawal is tax-free, subject to protection and the lump sum allowance (LSA). The rest is treated as taxable income and added to your annual earnings, which can quickly lead to a higher rate of tax being applied.

Many people fall into the trap of taking more than they need, unaware of the tax implications. Others may not realise that once they start drawing income from a defined contribution pension, their annual allowance for further tax-relieved contributions drops from £60,000 to just £10,000 under the Money Purchase Annual Allowance (assumes they were not already subject to tapering). This can be a nasty surprise for those who continue to work or return to employment and wish to keep contributing.

6. Using your pension as a rainy-day fund

There’s also the risk of relying too heavily on your pension to cover all future expenses. While it’s true that pensions offer favourable tax treatment and most can currently be passed on free of inheritance tax (although this is due to change from 2027), they shouldn’t always be your first port of call when you need money. Using other savings or investments first could give your pension more time to grow and preserve its value for the long term.

7. Not enjoying the fruits of your labour

The fear of running out of money in retirement can hold you back from enjoying the fruits of your labour. It’s by far the most common concern, worrying if you’ve enough money to see you through your retirement years. From paying your household bills and maintaining the lifestyle you want, to being able to afford the potential one-off larger expenses such as cars, home repairs or holidays.

The key to peace of mind and a stress-free retirement, is planning. Planning allows you to spend the money you have saved without fear that you’ll run out. Knowing how long your money will last and how much you can afford to spend is vital. That switch from using income to build capital to using capital to provide income can be daunting.

It’s essential to make sure you plan as early as you can, to forecast if the money and assets you have set aside for your retirement will be enough to see you through.  At TPO we use a tool called Cash Flow Forecasting. It gives you control over your finances so you can live comfortably now, be prepared for unexpected expenses, or changes in circumstances and still have a secure future to look forward to.

Why financial advice is worth considering

In an increasingly complex pension landscape, the temptation to make quick decisions - whether it’s to access funds, switch providers, or pause contributions, is understandable. But these decisions can be hard to reverse and may come with long-term consequences. Many people find themselves navigating these choices without a clear understanding of the rules, which can result in missed opportunities or unnecessary losses.

This is where financial advice can be invaluable. A regulated financial adviser can help you understand your options, avoid common mistakes, and build a retirement strategy that suits your personal circumstances and long-term goals. While there may be a cost to getting advice, it can more than pay for itself by helping you avoid the pitfalls that erode your pension over time.

Pensions are too important to leave to chance. By taking the time to plan carefully, staying informed about your options, and seeking advice where needed, you can avoid these common mistakes and give yourself the best possible chance of enjoying a financially secure and fulfilling retirement.

Arrange your free initial consultation

The information in this article is based on current laws, taxation and regulations which are subject to change as at future legislations.

This article is intended for general information only, it does not constitute individual advice and should not be used to inform financial decisions.

A pension is a long-term investment. The fund value may fluctuate and can go down. Your eventual income may depend on the size of the fund at retirement, future interest rates and tax legislation.

The Financial Conduct Authority (FCA) do not regulate estate or cash flow planning, or tax advice.

A good pension pot will look after you throughout your retirement. But what is a good pension pot – how much money will you need to rely on once you’ve retired, and how do you know how much to put in? More to the point, what is the average UK pension pot?

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What does a good pension pot look like?

There’s no single straight answer to the question of what a good pension pot looks like, as there are a number of different factors to take into account. For example, your own personal variables include your age, when you’re hoping to retire, the type of pension you have, and the amount of money you’re expecting to live on once you’ve stopped working. 

If you have a defined contribution pension, which is the most common type of pension in the UK, your pension’s value once you’re retired depends on what you’ve paid into it, any fees taken by your provider, and how your investments have performed.

What is the average UK pension pot?

According to the Financial Conduct Authority (FCA), the average pension pot for those aged 55 and over was around £107,300 as of 2022, although this varies widely by age group and region. However, this figure does not include the value of defined benefit pensions or the State Pension.

The Pensions and Lifetime Savings Association (PLSA) has also published Retirement Living Standards to help people gauge how much they might need, depending on the lifestyle they want. 

• For a ‘moderate’ retirement lifestyle, the PLSA suggests a single person would need around £31,700 per year, which includes the State Pension.
• For a ‘comfortable’ retirement, which includes a little more luxury, a single person would need around £43,900 according to the report.
• This would require a private pension pot of around £605,000 and £838,000 respectively, assuming retirement at age 65
• The figures also assume an annuity rate of circa 5.24%. and full state pension 

How much to put into your pension pot?

It can be tricky to know how much to put into your pension pot when deciding what sort of contributions to make. This is perhaps the main thing to consider, but it’s also important to think about how much you’ve got in there already and what other sources of income you’re expecting post-retirement. It’s often recommended to put about 15% of your income – pre-tax – into your pension every year while you’re working, but that might not always be possible.

Find out how much is in your pension pot at present – if you’ve got old pension pots from previous workplaces, you can track them down. If you have a financial adviser, speak to them about the merits of combining your pension pots, also known as ‘pension consolidation’. At this point, your pension provider should be able to provide you a simple projection of what your pension pot may be at the age you selected you wish to retire. As their projections are based on limited assumptions and are not personalised, you might also want to get an independent forecast from a financial adviser, like our TPO pension specialists.

Once you’ve got a projection, you can discuss your situation with your adviser, who will be able to let you know whether your pension pot size will meet your retirement needs. If not, they can help you decide on how to increase your monthly contributions at a sensible rate or change your investments in your pension to increase or decrease the investment risk you’re willing to take.

Retirement Calculator

 A useful tool to get a basic understanding of what your future retirement plans look like is our retirement calculator. From your own personal circumstances , you will be able to forecast an estimate of the pension income you will get when you retire and receive a target retirement income to aim for based on your choices.  

Am I saving enough into my pension?

How do I work out if I’m saving enough into my pension? Here's how to make a start:

1. Consider your preferred annual income in retirement, and any other guaranteed sources of income in retirement you may have, such as a state pension.
2. Subtract your guaranteed income from your preferred income, and you’ll see how much you’ll need to make from other sources, including your pension pot.
3. Through your workplace, you may have a final salary or defined benefit pension. These types of pensions can provide you with a guaranteed income for the rest of your life, and you can add it to your projected state pension to see how much you could earn when you’re retired. 

If you’re not sure how much income you’ll need once you’re retired, you can make a few calculations to get a rough idea. Just start with your monthly expenditure at present, and then subtract regular costs that might not apply post-retirement; will you still be paying off your mortgage by then, for example? Then subtract other costs. If you’ve currently got  dependent children who will be adults by the time you retire, consider how much you’d save as a result. Then, consider other savings you might be able to make, such as taking holidays during term time, and you should have a rough idea. 

You might also need some extra money in retirement, whether that’s for treating yourself to luxuries you didn’t have time for while working, medical expenses and care costs as you get older, or helping your grandchildren through university or buying their first home. When saving, it’s best to include a safety margin, rather than just going for the bare minimum.

One last thing to consider is how long your retirement might be. People retire at different ages, and if you retire later, you might not need to save as much, despite potentially being able to save more.

If you’re unsure, use 65 as the baseline. Then, estimate how long you might live – you can use a life expectancy calculator for this. According to the Office for National Statistics (ONS), life expectancy at age 65 is now around 19.8 years for men and 22.5 years for women in the UK, based on 2023 data. Of course, this also depends on your lifestyle and health. 

What is the 50 – 70 rule?

The 50 – 70 rule is a quick estimate of how much you could spend during your retirement. It suggests that you should aim for an annual income that is between 50% and 70% of your working income.

In other words, if you are earning £100,000 then in retirement you will want to achieve somewhere between £50,000 and £70,000.

This rule should not be relied on as in-depth retirement planning, rather it is the first step in calculating and deciding upon what your ideal retirement expenditure should be. Realistically you will want to look at your employed income and expenditure and then think about what will changes in retirement, for instance will you spend less money as you stop commuting? Or more money on holidays? This should then help you to have a more personalised expenditure plan for your retirement. 

How to check my pension pot

It pays to check your pension pot size on a fairly regular basis, so that you can ensure you’re on track to meet your retirement needs. If there’s an issue, but you spot it earlier, you should be able to fix it with less difficulty.

First of all, it makes sense to request a State Pension statement – you can do so online, over the phone, or by post, as long as you’re aged over 16 and are more than 30 days away from your State Pension age. Then, if you belong to a defined benefit or final salary pension, your provider will usually send over a benefit statement each year, but you can ask for one if you need to. On the statement, you’ll be able to see how much you’re likely to receive with options surrounding whether or not you take some tax free cash. With regards to any defined contribution pensions you have, your annual statements will give you an idea of your future pot value, and the expected retirement income you’re thought to be in line to receive once you retire assuming you purchase an annuity. 

It’s worth bearing in mind that you might have other sources of retirement income too, be they investments or savings. These could include a property that you rent out, share-based investments, or cash deposits, and you may be able to get statements for these, too.

Saving for retirement can be stressful, and it’s not always easy to know how much money to put aside while you’ve got immediate expenses to consider. If you’re uncertain about whether you’re on track or simply want reassurance that your plans are realistic, a conversation with a financial adviser can be invaluable. Get in touch with The Private Office for a free initial consultation with one of our financial advisers.

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This article is intended for general information only, it does not constitute individual advice and should not be used to inform financial decisions.

Investments and the income derived from them can fall as well as rise and you may get back less than you originally invested. Past performance is not a guide to future returns.

The Financial Conduct Authority (FCA) does not regulate cash flow planning, estate planning, tax or trust advice.

The information in this article is based on current laws and regulations which are subject to change as at future legislations.

A pension is a long-term investment. The value of an investment and the income from it could go down as well as up. The return at the end of the investment period is not guaranteed and you may get back less than you originally invested.