Visualise it, and make it happen

Are you ready to step into the retirement you’ve visualised? Or do you need a little more time to plan, consolidate and build up more savings?

In this section we’ll look at some of the things you need to consider before you take the plunge. If you haven’t read the ‘Understand tax’ section yet, we suggest you read it now so you can take this into consideration too.

Imagine going into retirement debt-free. Paying off your debts can be a big step towards the retirement you’ve been dreaming of.

• Could you plan to pay off your mortgage, and any other loans you have, by the time you retire?
• Could you reduce your credit card bills to the point where you pay them off in full each month?
• Do you need help with problem debts?

If you’ve got several pension pots in different places, could you benefit from bringing them together (known as ‘consolidation’)? Here are some of the possible benefits.

• You’d be able to see exactly how much you’ve got in your retirement savings, all in one place rather than having to check multiple plans or accounts.
• It could make managing your pension easier, as you’d only have to deal with one pension provider and pay one lot of charges.
• Modern pension plans often have a wider range of investment options and lower investment charges compared to older pension plans.
• You could have more choice of retirement options with one large pot rather than several smaller ones.

To transfer or not to transfer?

Whether transferring all your pensions into one place is a good idea may depend on what kind of pensions you have.

• If all your pensions are defined contribution (DC), putting them together could give you lower charges and more choice as set out above. But it’s still important to look carefully at each of your DC pensions to make sure consolidation is right for you. To maximise your options, you could consolidate your pensions just before you plan to start taking your benefits. Recent DC pensions (such as auto-enrolment plans) have no penalties for transferring, and don’t have guaranteed benefits, so they tend to be fairly straightforward decisions to make based on comparing charges. Older DC pension plans may have guaranteed investments (such as With Profits) or guaranteed pension terms (such as guaranteed annuity rates), which would be lost if you transferred. Older DC pensions are likely to have higher charges, but also may have a penalty for transferring. You may need an expert opinion if you aren’t sure what type of pension plan you have. See the ‘Getting support’ section for more about financial advice.

• If you have any defined benefit (DB) pensions, you need to think seriously about whether transferring them is a good idea. It may not be. A DB pension promises a guaranteed income for the rest of your life and, in some cases, a guaranteed income for your dependants after you die. Transferring a DB pension to a DC pension pot means giving up these guarantees in return for access to the flexible retirement options available for DC pensions. You’ll need to consider which is most important to you: the certainty of an income, or flexibility. And, unless your DB pension is worth £30,000 or less, you’ll be required to take financial advice before you can transfer it out. See the ‘Getting support’ section for more about financial advice.

You’ll need to decide where to transfer your pensions to. You might be able to transfer them into your current workplace pension, but you’ll need to check whether your workplace scheme can accept the transfer. Or, you could transfer to a personal or stakeholder pension (as long as this doesn’t mean you miss out on contributions from your employer to your workplace pension). We’ve got a useful briefing note on transferring pensions.

We covered the different options for withdrawing your pension benefits. But what are the different risks and rewards?

Find out more about – go to our ‘Understand tax’ section.

You may be ready to retire financially. But are you ready mentally and emotionally?

Retirement doesn’t automatically guarantee a carefree, stress-free life. No longer having your work routine or social contact with colleagues can cause you to feel displaced and lost. Without work to focus on, things you didn’t worry much about previously – like family and health issues – can become overwhelming.

1. Make a plan

It’s as important to make a plan for what you’ll do in your retirement as it is to have a financial plan. If you’ve already visualised your retirement strongly, this shouldn’t be hard. Write down how you intend to spend your days. What will you do? Where will you go? Who will you see? What are your long-term goals – travelling, home and garden improvements, learning?

2. Check expectations

Obviously your retirement is your own, but it can be helpful to know what other people’s expectations are.

• If you have a partner, how well does your mutual vision for retirement line up? For example, has one of you always assumed you’d travel a lot more or move home, while the other one wants to stay put and garden?
• Do other family members assume you’ll be available to look after dependants such as grandchildren, or that you’ll be able to visit them more often?

3. Find a purpose

It may sound like the ultimate retirement cliché. ‘Take up a hobby!’ But many people find having a purpose – hobbies, sports, studying or learning new skills, volunteering – gives them something to focus on, helping to keep other things in life in perspective. It can also be a way to replace social contact you’ve lost by finishing work.