How to prepare for retirement

Find out how much your retirement income is likely to be. First, you should work out your potential retirement income. Perhaps you'll be using the State Pension, a Workplace or Personal Pension or a combination of these. Whichever way, there are several steps you can take to find out what these are potentially worth, from requesting State Pension statements to tracing lost pensions.

Your State Pension

Find out when you can start receiving the State Pension and how much you will receive.

• Check your State Pension age.
  The State Pension Age Calculator will tell you when your State Pension is payable.
• Find out how much your State Pension is worth.
  Get an estimate of your State Pension at the GOV.UK site.
• Boost your National Insurance (NI) contributions.
  If you have an NI contribution record of less than 35 years, you won't receive a full State Pension. Find out how to add to your contributions.
• Find out if you qualify for Pension Credit.
  If you're on a low income, the Pension Credit Calculator can tell you if you're eligible for this benefit.
• Consider delaying the State Pension.
  If you choose to defer your State Pension, it could be higher when you start to take it. Find out more.
• Check your State Benefits
  If you, or your partner, are receiving, or entitled to state benefits, you may need to declare any money you take from your pension pot to the Government. State benefits include:
  
  • universal credit
  • child benefit
  • or anything similar where the amount you receive depends on how much you earn or have in savings. This could have an impact on the level of benefit you’re entitled to. 

There are a wealth of benefits available to pensioners. Winter fuel allowance, free bus travel and prescriptions are just a few. For more information visit the GOV,UK website.

• Check the value of your pension savings
  Each year you should receive a statement. This will help you calculate how much income you might receive in retirement
  You can also do this online through your account
• Find lost pensions
  If you’d like to track down pension savings from previous jobs, the government’s pension tracing service could help. Please visit gov.uk/find-pension-contact-details.
• Think about bringing your pension savings together
  Sometimes you can get a better deal by putting all your pensions into one pot. Get advice and check if there are any charges, or if you lose any guaranteed benefits from the pension.
  Before you consider this you should check the charges linked to each pot and whether you could lose out on any valuable benefits or guarantees. If you have more than £30,000 in a pension with guarantees, such as a defined benefit scheme, you will need to get advice. A defined benefit pension is usually one that you'll have access to through an employer. The value will be based on your salary and how long you've worked for that employer.
  If you're in any doubt whether combining your pensions is right for you, you should get financial advice. You get guidance on combining your pension pots through the government’s free and impartial service, MoneyHelper.
• Decide what to do with your pension savings
  From cashing out your pension to getting a guaranteed income for life, there are more options for using your pension savings than ever before. You can also choose to leave some or all of your pension savings invested. You may benefit from expert advice and guidance.
• Shop around for the best deal
  You don't have to accept the income offered by the company you've saved with. If you want to buy a retirement product, make sure you shop around as other providers may have more appropriate products for you or be able to pay higher amounts of income.

• Savings and investments
  You may have other savings, types of pensions and / or investments to use as sources of income, once you're retired. You might have money put aside in ISAs, for example. If you have shares, you might receive dividends from them.
• Find out if you can use your property
  If you own your property, you may see it as a type of future pension. You could use it to provide a rental income, renting out a room for example, or a home, if you have a second property. Or you may be able to release some of the equity to help boost your income. Options include selling your home and downsizing, or using equity release or a retirement interest-only mortgage, both of which are loans secured against your home. We suggest you talk it through with your family first, and then get some professional advice. There will be some costs involved, and it may affect your eligibility to some means tested state benefits. For any of the above options, dividends, selling or renting property, there may be tax to pay. This will depend on personal circumstances and tax rates and allowances may change.
• Make sure you understand the benefits
  There are a wealth of benefits available to pensioners. Winter fuel allowance, free bus travel and prescriptions are just a few. Don't miss out.
• Not ready to stop working yet?
  There’s no need to access your pension savings until you want to. You can continue to save into your pension and decide what to do at a time that suits you. Your pension savings remains invested which means the value can go up or down. If you choose to delay your retirement age, it's important to update this in your account.

• Create a budget and see where your regular income goes
  You may no longer have commuter expenses to worry about, work lunch to buy or a uniform to pay for. These costs add up, so you will be saving money – but you are likely to have much less disposable income now that you're retired. You can use MoneyHelper budget planner for more guidance.
• Will you have any new expenses?
  Will you be playing more golf, travelling frequently or taking up new hobbies that may be costly? Perhaps your energy bills will increase thanks to longer periods at home.
• Consider what expenses are optional...
  ... such as eating out, socialising or holidays. If you need to cut your expenditure, these are the areas you can usually target to make changes.
• Don't forget occasional expenses
  There are costs that don't occur each year: for example, buying a new car or replacing the computer, television or washing machine. From time to time unexpected bills may arise like household repairs.
• Retirement Living Standards tool
  Find out how much you might need in retirement with our Retirement Living Standards tool.

A reduced annual allowance may apply. You can find out more about your annual allowance in our guide.

You should also consider how your money will be treated at the time of your death and whether there’s enough money left to provide for your dependants.

With some options your money may be subject to inheritance tax, so it’s important to consider this before you decide.