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Coming up to retirement? Don’t make these mistakes!

Jasmine Birtles 22nd Jan 2024 One Comment

Reading Time: 7 minutes

Retirement should be a long and happy experience, full of fun things to do and the leisure to live how you like because you have the money to do it.

Sadly that’s not how it is for everyone.

However, if you do some planning – even if you’ve left it really late – you can create more wealth for yourself for that lovely time of life so that you don’t have to scrimp and save or keep on working to get the cash in.

Here are eight pitfalls you must avoid in order to gather up enough cash to keep you going and going and going!

  1. Don’t withdraw your savings from your pension too early
  2. Make sure you understand how your pension is invested
  3. Grab any forgotten pensions using our free service
  4. Get some advice from someone who really knows
  5. Don’t worry about leaving it too late
  6. Watch out for pensions scams
  7. Shop around
  8. Remember the tax (ugh)


1. Don’t withdraw your savings from your pension too early.

According to retirement specialists, Wealth at Work, the rising cost of living has meant that one in 10 (10%) over 55s in full-time employment have withdrawn some of their pension savings earlier than they originally intended to in order to supplement their income. Actually, nearly a third also say they might have to withdraw savings early, in the future.

Try and do everything you can to avoid dipping into your pension pot early.It’s better to take on extra work or get a side hustle (we have LOADS of ideas for those) to help you and your family through the tough times, rather than reducing your retirement fund.

Taking some of your pension out early should be seen as a last resort, because even taking a few thousand out of your pension early can mean a big drop in your income later on. It could either mean that you have to work longer or you live on less in retirement.

If you’re in your fifties or early sixties and looking for a long and prosperous retirement, you should be adding in as much of your money as possible to your retirement fund.  As the cost of living goes up you actually need more money, not less, in retirement to keep some sort of standard of living, specifically if you need senior living accommodations.

That’s not to say that it’s not also a great idea to keep your hand in with some sort of work when you’re retired. Loads of people do that and it adds some fun and interest to their lives. So don’t beat yourself up if you find that you really need to do at least some part-time work when you’re retired. For many people it gives them a reason to get up and puts them in touch with the public in a way that they might not do if they didn’t work.


  1. 2. Make sure you understand how your pension pot is invested

Pension managers tend to move the investments in your pension to less risky (and therefore less rewarding) products when you come closer to retirement. It’s called ‘lifestyling’ your pension and the ideas is that it stops nasty shocks when you come to use the pot of cash in there.

However, although Lifestyling pensions used to make sense when people had to buy an annuity in retirement, now many people access their pensions using income drawdown (kind of using your pension pot as a bank account), so it doesn’t work so well.

In fact, it could be better for your pension to stay invested in riskier (and more rewarding) investments long into retirement, to give the money the potential to keep growing. It’s worth speaking to your pension provider to find out what the pension is invested in and if it’s making enough money for you If you have a company pension, ask HR to talk to you about it and put you in touch with the pension managers.


  1. 3. Grab any forgotten pensions using our free service

Did you know there were £26.6 billion in lost pensions in the UK in 2022? Some of that money could be yours so why not go and grab it?!

Loads of people have pensions from old jobs that they had forgotten about or lost sight of. It’s a really good idea to trace these and, possibly, move them into one pension, if that’s feasible.

It’s not always a good idea to consolidate pensions as there might be extra benefits attached to one or more of the pensions, but it is definitely worth having those lost pots anyway.

It’s actually not that hard to find old, lot pensions. You can use the free pension-finder service, Gretel.co.uk, which will search the pension companies for you and then let you know if they have found anything. It might take a few days or weeks for them to trace these old pensions, but it’s worth the wait!

Find out here how to trace lost or forgotten pensions and what to do with then once you’ve found them!


4. Get some advice from someone who really knows!

Your retirement is likely to be a good long time. Average retirements now last 20-30 years, which is quite a stretch to pay for if you’re not planning on working anymore.

Research  from Wealth at Work has found that more than half of workers say they get advice about their pensions from family, friends or colleagues. Sometimes they don’t even bother asking anyone at all. Certainly very few speak to a professional like their pension provider, employer, a regulated financial adviser, which means many people go into retirement without much of a clue of how they can maximise their savings. This is not a good idea!

It’s really important to make the very most of the money you have invested in pensions and other investments. The more, proper advice you get on it early on, and close to retirement the better. It means you can maximise your money and avoid any nasty shocks!

It’s worth paying for some good advice. You can get one free session with Pensiohwise once you are 50 or over, which you should grab with both hands because…well…it’s free! But it’s also worth paying for advice from a proper financial advisor, even if it’s just as a one-off, to go through your investments, make suggestions as to whether you should do drawdown or take an annuity, or both, and look at other aspects of your finances such as life insurance, making a will, cutting down inheritance tax and making provision for care.

It you don’ tpersonally  know a good financial advisor, there are step-by-step instructions here on how to find a good, independent financial advisor here including how to get free sessions.


  1. 5. Don’t worry about leaving it too late

According to investment platform Hargreaves Lansdown (HL), people often worry that they’ve left retirement planning too late, although, with a bit of help, they can usually build up their pot even if they start late.

HL’s research has found that nearly a quarter of workers wished they had started investing sooner. Admittedly, it is best to start putting money way as early as possible as the longer you leave your money in an investment the better it will grow. However, even making small increases to your contributions in your 50s or 60s can make a big difference to what you end up with. If your employer offers to match your contribution increase, that can give you an even bigger pot.

Helen Morrissey, head of retirement analysis at Hargreaves Lansdown says “it’s never too late to make a difference. Calculations using HL’s pension calculator shows that someone aged 45 earning £34,000 per year with a pension worth £60,000 could have amassed as much as £160,000 by the age of 68 if they continue contributing at auto-enrolment minimum levels. However, if they boosted their contribution by around £50 per month, they would see that grow to £180,000. Boosting it by £100 per month could see it climb even further up to around £198,000.

So if you’re kicking yourself for leaving it all so late, don’t be hard on yourself. Millions of people wish they had put more into their retirement funds and done more about it earlier. But it’s never too late so get some advice and take it from there.


6. Watch out for pensions scams

Pension scams are cruel and sadly happen all the time. The Pensions Regulator estimates that £2.5 trillion-worth of pension wealth in the UK is ‘accessible’ to fraudsters, which means we all have to be on our guard.

If you’re planning on moving your retirement savings to a different investment company, make sure it’s registered with the FCA (the Financial Conduct Authority) That will reduce the likelihood that you’re dealing with scammers. Also, if the worst happens and the fund collapses, it means that your money (or much of it) will be covered by the Financial Services Compensation Scheme (FSCS). The FSCS cover quite a lot of financial products and it’s useful to check their website to see when you could be compensated for.

7. Shop around

Many people are choosing to use income drawdown instead of an annuity in retirement.

However, it’s crucial that you shop around to make sure they are getting the best deal.

In 2022 , Which? found that the difference in growth between the cheapest and most expensive drawdown plans for a £260,000 pot was nearly £18,000 over a 20-year period.

Again, if you speak to an advisor you can find out the best value way to draw your money in retirement.


  1. 8. Remember the tax (ugh)

Some people don’t realise that income tax is due on their pensions once the 25% tax-free lump sum has been taken. This means that someone who has never been a higher rate tax-payer, suddenly could find themselves in that bracket, especially if they are still working.

It’s so annoying as you pay tax all your working life and then find that you have to do it again when you’re retired. If you do well with your money you might even pay more than before!

Wealth at Work gives an example: if someone aged over 55 is earning £40,000 a year and has £30,000 in pension savings, decides to withdraw all their pension, 25% of this (£7,500) would be tax- free, but the remaining £22,500 would be eligible for tax. Their taxable income for that year would be £62,500 (£40,000 salary and £22,500 pension), meaning that they would become a higher rate taxpayer. This means they would be taxed 40% on the £12,230 income that exceeds the £50,270 higher tax threshold.

It’s possible that other savings and investments may be a better source of short-term cash than pensions, especially while you’re still working, as it can help to avoid unnecessary tax being paid and allows the pension to grow in a tax-free environment.

If you don’t know a good financial advisor, take a look at Vouchedfor.com which has a list of advisors near you that have good reviews from other customers. Try it out here.


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    Parveen Kouser
    Parveen Kouser
    4 months ago


    Jasmine Birtles

    Your money-making expert. Financial journalist, TV and radio personality.

    Jasmine Birtles

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