Deciding when to retire is a very personal choice. Some people can't wait to retire while others are reluctant to give up work. However you feel about retirement, it’s important to think through your options carefully, considering how each would affect your life.
In particular, people thinking of retiring early might want to consider whether their pension fund will be large enough to see them through a long retirement. Many people underestimate their life expectancy. Some will be retired for 40 years or more!
My retirement planner
Want to check if your plans are on target for the date you want to retire? Or to find out how long your pension money might last once you’ve stopped work?
Aviva can help you get your thoughts together on issues like these. Our online tool can help you get an idea where you stand, though it’s only intended to provide general information. It’s easy to use and only takes a couple of minutes.
Things to consider
Think about what you want from your retirement
Whenever you’re thinking of retiring, it’s important to think about how much money you’re likely to need to fund the lifestyle you want when you’re retired.
- Think about how much you need to spend – remember, you might be able to manage on less once you’re retired – and whether you’ve made provision for any unexpected expenses which may arise.
- You also need to consider how inflation and the rising cost of living could affect your income over the coming years.
- It’s also important to think about any benefits you could be entitled to receive – including the State Pension. The date you retire could affect these.
All of these issues could have a bearing on when you decide to retire. You might find it useful to work out a budget to help you to get an idea of how much you’ll have to live on when you retire, and what your regular expenses are likely to be...
Would part-time work be right for you?
It may be possible for you to continue working while still taking benefits from your pension plan.
If you don't want to give up work completely, you may be able to decrease your working hours – or take up part-time work instead of the job you’re doing now. Some people choose to do this rather than go from full time working to retirement.
More choice on how to take your pension
From April 2015, you’ll have more freedom of choice in how to take money you’ve saved in your pension fund.
- You’ll be able to take as much of your pension fund as you like as a cash lump sum if you’re aged 55 or more. The first 25% will be tax-free.
- If you choose to take more than 25% of your fund as cash you’ll be able to do so, with tax payable on the additional amount at your marginal rate.
You need to think carefully before deciding what to do. It may be tempting to take cash from your pension fund, but taking as much as you’d like could mean falling in to a higher tax bracket that year, or you run out of money during your retirement.
It may be worth looking into the options for taking an income from your pension fund
Think about tax
An individual’s tax position may change when they retire, depending on their personal circumstances. People who fall into a lower tax-band when they retire could save tax if they delay taking more than the tax-free amount until after their retirement.
Find answers to the question of How will I be taxed when I withdraw money?
You may also need to consider whether your loved ones would have to pay inheritance tax when you die. No-one likes to think about this, but there are advantages to finding out where you stand as early as possible.
Find out more about this: What happens to my money when I die?
The information on this page is based on our understanding of current tax rules, which may change.
If you want to delay your retirement
You might not want to retire as soon as you reach State Pension age, or at the age when you originally planned to stop working. If you’re not ready to give up work, or think you can’t afford to retire yet, you need to let your pension provider know.
If you decide to leave your money in your pension fund for now, there are some important points to consider...
- If you’re about to retire, or reduce your working hours, you may not be able to carry on making payments into your plan at the same rate.
- Your money will have the chance to grow, but you should always bear in mind that the value of investments can go down as well as up.
- If you leave your pension fund invested, charges for managing the fund will continue to be applied whether or not you withdraw money from it.
- If you decide to use money from your fund to buy a retirement income later, there’s no guarantee you’ll receive the same income which you would now.
- Delaying your retirement date may affect any state benefits you may be eligible to receive.
- If you have life insurance under your plan it will come to an end at your original retirement date.
Call us now for more information
If you’re new to Aviva
0800 285 1088
Lines are open Monday to Friday, 8.00am-6:30pm.
Or if you’re already a customer
0800 158 3470
Please be aware this line is very busy at the moment, we are doing all we can to answer your call.
Lines are open Monday to Friday, 9am-5pm.
Calls are free from UK landlines but you may be charged for calls made on mobile phones. For our joint protection, telephone calls may be recorded and/or monitored.
Find out how we can help you when you call our teams
If you need some help or information from Aviva, please call us on one of the numbers above. We can help you with:
- Using our website
- All the facts about Aviva products and services
- More details on the options you can choose from when you’re making decisions about your retirement
- Information on where to find financial advice
- Although we can’t give you advice, we can put you in touch with an adviser who can talk to you about which financial products or investments may be right for you.
- Alternatively, you can visit www.unbiased.co.uk to find an adviser in your area.
Pension Wise is a free and impartial service set up by the government for people retiring with defined contribution pensions. It will help you understand what your choices are and how they work.
You’ll be able to get help on the Pension Wise website, over the phone or face to face about:
- what you can do with your pension pot
- the different pension types and how they work
- tax you pay on your pension.
If you're not sure about your options at retirement you should seek appropriate guidance or advice.