Pension advice and retirement planning

Whether you can afford to retire depends on factors like how much you’ve saved, when you hope to retire, and the lifestyle you’re expecting in retirement. You can get a sense of how much you might need by checking the Retirement Living Standards (RLS), published by the Pensions and Lifetime Savings Association. The RLS gives estimates of what retirement might look like at three different levels of income.

Your adviser will use the Retirement Living Standards in conversations with you. They’ll also use a type of forecasting called cashflow modelling to help you see the best ways of using your pension and investments to support your retirement.

A defined benefit (DB) pension – sometimes called a final salary pension – pays a retirement income based on your salary and how long you have been a member of your employer’s pension scheme. Defined benefit pensions are most common in the public sector and older workplace schemes. A tax-free lump sum will usually also be available. In some schemes, you will give up some of your income to pay for a lump sum.

A defined contribution pension lets you build up a pension pot that provides a retirement income based on how much you and your employer contribute and how much this contribution grows. Up to a quarter of the pot can usually be taken as a tax-free lump sum, though this would reduce the amount available for your retirement income. The value of a pension pot can go down as well as up.

In most cases, you don’t need to get an adviser by law, but deciding how to save for retirement can be a complex decision. Also, some decisions, like whether to start taking an income from your pension, can never be unmade. That’s why personalised advice from a qualified adviser can bring real relief. 

The Financial Conduct Authority (FCA) requires you to take financial advice before transferring if the transfer value of your defined benefit (DB) pension is over £30,000.

MoneyHelper is a free financial guidance service backed by the Government. It’s there to help you understand your pension and other finances, but it can’t give you personalised advice – for that, you’ll need a qualified adviser.

Currently you can take 25% of most DC pensions as tax-free cash whenever you choose, once you reach age 55. From April 6th 2028 this will be age 57. You might be tempted to take the full amount as soon as you can. Your adviser can explain the potential drawbacks of that approach and suggest some more tax-efficient ways of managing your wealth.