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When is the right time to retire?

Deciding when to retire is a very personal choice. Some people can't wait to retire while others are reluctant to give up work. Whichever camp you fall in, you need to think it through carefully, considering your options and how each option will affect your life.

If you don't want to give up work completely, you may be able to decrease your working hours. Some people choose to do this rather than go from full time working to retirement. You can also think about taking a part-time job if you want to top up your income. Nowadays, you have much more choice about what you want to do in your retirement.

Whatever you choose, you just need to make sure that you've thought it through and it's right for you.

What should you consider?

There are a number of things to think about before you decide when it's the right time for you to retire. Here are just a few of them.

When you retire, you normally swap your pension fund for a retirement income.

Retiring in the next 12 months

In the 2014 Budget, the Chancellor announced changes that affect the options open to you if you're planning to retire in the next 12 months. You should understand these changes before making any decisions about your retirement.

Pension Annuity Calculator

See how much income you could get from your pension fund.

Retiring in more than 12 months

Use My Retirement Planner to assess the future value of your personal pension plans and how much income they may provide you with in retirement.

Budgeting effectively

Use our budget calculator to see exactly where your money goes. It's quick and easy to use and an ideal place to start if you want some help budgeting.

What about tax?

Your tax position may change when you retire, but it depends entirely on your personal circumstances.

You may also need to consider your potential inheritance tax liability and the position your loved ones may be in when you die.

Read more about tax.

Continue working and take a pension income

It may be possible for you to continue working while still taking benefits from your pension plan.

You can buy an annuity with your pension fund without giving up work. If you have more than one pension plan, you may decide to take benefits from only one plan at first and leave the rest alone for now.

Alternatively, we offer a retirement income plan. This lets you start using your pension fund for a fixed term of your choosing between three and 25 years, depending on your fund choice. This is suitable if you have a pension fund of at least £10,000, after tax free cash is taken. Find out more about our Fixed Term Retirement Plan.

You could also consider income drawdown, but please bear in mind that this is usually unsuitable for anyone with a pension fund of less than £100,000. Find out more about our Income Drawdown plan.

Related FAQs

Why do I need to budget?

When you retire, it's likely that your income will be lower than you're used to, and depending on the options you choose, may not increase from year to year. Budgeting will help you see how much of this money you need to cover your bills and how much is left over for other expenditure. It may also help you identify where you can make savings.

What is income drawdown?

Also known as pension fund withdrawals, income drawdown is a way of taking an income from the money you've built up in your pension fund while still keeping it invested.

Currently your income can be taken using either capped or flexible drawdown:

  • Capped drawdown means the income you can take is subject to maximum limits set by the Government.
  • Flexible drawdown means you're not restricted by income limits set by the Government. To be eligible for flexible drawdown you must meet a number of rules set by the Government. Speak to your financial adviser to see if you're eligible for flexible drawdown.

You can transfer money from any pension fund to an income drawdown plan. You need a minimum of £30,000 to set up the plan, but it's really only suitable for people with a pension fund of £100,000 or more.

You can use the income you receive from an income drawdown plan to fully or partially retire. As your pension fund remains invested, you still have the potential for growth, free of UK income and capital gains tax. However, you must bear in mind that the value of your fund can go down as well as up, it isn't guaranteed and may be worth less than the amount paid in.

From 6 April 2015 things are changing, and there will be no limits on the amount you can withdraw. For more information about this see How do I take money from my pension fund?

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Tools & Calculators

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