Retirement Routes: Timing

Over the past few weeks, our ‘Retirement Routes’ series of blogs mapped out the different options you have for taking your retirement benefits – guaranteed income (annuity), flexible income (drawdown), cash, or a mix-and-match of the options.

This week, we’re looking at the all-important question – ‘when?’

In this blog:

• When can you take your retirement benefits?
• Are you ready to retire?
• Beware of scams
• Support on your journey

When can you take your retirement benefits?

At the moment, the minimum age you can start taking retirement benefits is usually 55. But the longer you leave your pension savings, the more retirement income you’re likely to get, as it has more time to build up from contributions and investments.

The age at which you can start taking retirement benefits will increase to age 57 in 2028. If you have a protected early pension age (which your pension provider will know), you won’t be affected by this increase.

Are you ready to retire?

Timing is vital
Timing is everything when it comes to retirement. Gone are the days when you had to hang up your working boots and take your benefits in the form of an annuity. Now, you have the flexibility to start dipping into some of your retirement benefits while you’re still employed, or even opt to access them bit by bit. However, if you want to continue making pension contributions, you’ll need to keep an eye on the Money Purchase Annual Allowance to avoid any surprises.

Have you saved enough?
It’s common to think you’ll retire at 60 or 65, but people are living longer these days – thanks largely to medical breakthroughs and better living conditions. In the UK, between 2020 and 2022, a typical 65-year-old man could look forward to another 18.3 years of life, while a woman could expect around 20.8 years (Source: Office for National Statistics: Life expectancies). This means retirement could last upwards of 20-25 years, or even longer.

So, have you saved enough? If not, you might need to consider extending your working years – to help boost your pension pot and ensure your retirement savings stretch far enough to cover those extra years.

State Pension age
The age at which you can start claiming your State Pension might not align with when you plan to tap into other retirement benefits. Make sure to check your official State Pension age. This can help you figure out if you can afford to retire early or if you’ll need to wait until you can claim your State Pension.

Dealing with debts
Take a moment to assess your debit situation. Is your mortgage fully paid off? Do you have any outstanding loans or credit card debts? Having a plan to clear these debts can significantly influence your retirement timeline.

Considering loved ones
Retirement planning isn’t just a solo endeavour, especially if you’re married or have a partner. Will you both retire at the same time? And what about your family and friends? Retirement could mean more time for these relationships, possibly including caring responsibilities. Think about how these factors might play into your decision on when to retire.

Preparation beyond finances
Financial readiness is important, but so is being mentally and emotionally prepared for retirement. Have you thought about what you’ll do once you’re no longer working? What will give you a sense of purpose? Consider how you’ll fill the hours you used to spend at work, whether it’s through hobbies, volunteering, or something entirely new.

Find out more about key considerations when taking your retirement benefits on the Resource Centre.

Beware of scams

When taking your benefits, you need to be aware of pension scams. Roughly 1 in 4 people could potentially fall victim to pension scams, and each victim suffers an average loss of around £75,000.

Follow our three top tips and keep your pension savings safe:

1. Reject any unsolicited phone calls, emails, texts, or visitors to your home. If you’re contacted out of the blue about your pension, chances are it’s a scam.
   
2. Check who you’re dealing with. Make sure the person or company you’re dealing with is regulated by the Financial Conduct Authority (FCA). You can check the FCA register of regulated companies, or the FCA warning list. If you don’t use an FCA regulated firm, you won’t have access to the Financial Ombudsman Service or Financial Services Compensation Scheme (FSCS) – so if things go wrong, you’re unlikely to get your money back.
   
3. Don’t be rushed. Take your time with any decision about your pension and do your own research, using sources other than the ones they recommend. Does it sound too good to be true? If the answer is ‘yes’, it probably is. You could also get regulated financial advice or guidance from an FCA regulated firm.

Find out more about pension scams in our ‘Shield your savings’ series of blogs.

Support on your journey

Deciding when to take your retirement benefits is one of the hardest choices facing most people. Here are five good reasons to get expert help with taking your benefits and deciding which route to take:

1. Don’t get overwhelmed by the choices
   There are lots of options, which is great but it can also be confusing. Some choices are so different from others that comparing them feels impossible. An expert can help clear up the confusion and guide you through your choices.
   
2. Consider your own needs
   There’s no one-size-fits-all solution when it comes to retiring these days. An expert can look at your specific situation and figure out which options might be the best fit for you.
   
3. Make the most of your money in retirement
   An expert can help you look around for the best deals, meaning you’re not stuck with your current pension provider if there’s something better out there.
   
4. Discover new possibilities
   An expert who knows their way around retirement options might find solutions you hadn’t even considered, like mixing and matching different plans in ways you hadn’t thought possible.
   
5. Steer clear of expensive errors
   Some decisions can’t be undone once you’ve made them. An expert can help you make choices that you’re less likely to regret later.

Guidance
Pension Potential, a service from Punter Southall, can help you think about:

• whether you need more time to build your savings up,
• taking your benefits in stages or all at once, or
• how your plans fit in with your loved ones.

Just fill in the short form on the Pension Potential hub to download a free, personalised pack and explore the different ways to take your retirement benefits. The pack can help you understand whether you’re ready to take your retirement benefits, or whether you need to keep saving for a few years.

Alternatively, you can get guidance about the different ways to take DC retirement savings through Pension Wise. If you’re aged 50 or over, you can book a free guidance call.

Advice
A good financial adviser will take the time to understand you and your situation. This helps them know what matters to you and what you want to achieve with your retirement savings. They can then help you understand what your money can do for you, assist in passing your estate to your loved ones in a tax-efficient manner, and provide peace of mind.

Individual financial advice is available through Foster Denovo, the parent company of Secondsight and Aspire to Retire.

>You can contact the team by calling 0330 332 7866, or by emailing advise-me@fosterdenovo.com. Foster Denovo will explain any fees clearly in advance.

You can also find more information on getting guidance and advice on our ‘Help and support’ page.