Take stock of your money

There are different types of pension products available. It is important to understand exactly what you have, because this will affect how it can be accessed and ensure you don’t give up any valuable benefits they might offer.

You may have built up several pension pots or types of pensions over the course of your working life. Your partner may have some too, and you may find they have different selected retirement ages on them to yours.

• Learn about the different kinds of pensions you may hold.

It's worth finding out what your State Pension may be and when you will get it under the current rules. This may be different to your partner. 

• Learn about the State Pension
• Find out your State Pension age
• Get your State Pension Forecast

Defined Contribution schemes - these enable you to build up a pot of money that you can usually access from age 55. The size of your pension pot will depend on how much you and your employer pay in, how your investments perform and the effect of any charges. You might also hear these called 'money purchase schemes'. 

You may also have arranged a personal pension yourself which will also be a type of defined contribution scheme. 

You should receive an annual statement for your defined contribution pension which estimates the monthly retirement income your pension might generate if you were to convert it into a guaranteed income for life (also known as an annuity). But there are other options to take your money from this pot such as taking cash lump sums, or variable amounts to give you an income (known as flexi-access drawdown). Your scheme may allow you to mix and match these options.

• Learn more about your options for accessing your pot.

The income on your statement might not assume that you take your tax-free cash lump sum.

• Use our retirement planning tool to consider what income you could achieve in retirement.

Defined benefit pensions – sometimes referred to as 'DB pensions' or 'final salary pensions'. They were traditionally offered by large employers and local authorities, and will pay you a pre-determined income until you die based on how long you have been part of the scheme and what you earned whilst you were employed - rather than the amount of contributions made. 

Sometimes this is what you earned when you left (known as 'final salary') and sometimes it is based on an average salary (known as 'career average revalued earnings' or 'CARE scheme').

They may include pension provisions for surviving partners or dependants. 

It’s usually wise to leave these types of pensions in place. Indeed, to ensure that people don't lose out on these valuable pensions by mistake, the Government requires anyone who wants to transfer a defined benefit pot of more than £30,000 to take financial advice. 

If you don't receive an annual benefit statement from your DB scheme you can request one.

The statement shows how much pension you might get. It might assume that you take your tax-free cash lump sum.

It may be possible to take your income earlier or later than the scheme's retirement age in return for less or more pension. Contact your scheme's administrator for more information.

Private and workplace pensions should send annual statements, but they're easy to lose or if you haven't told your provider your address if you have moved. If you've lost track, don't panic; 'lost' pensions are usually the result of when people move home and doesn't tell a pension provider from a previous job. In some instances, people may not even remember or realise that they were enrolled into an employers' pension scheme. 

1.6 million pensions holding an average of £13,000 each have been lost in this way, according to a 2018 estimate by the Association of British Insurers. 

If you think you may have had pensions with previous employers or that you set up yourself, you can try to trace them.

The Government website has a basic online service to help you get up-to-date contact details so you can find out if you have any entitlements.

You'll need the name of your pension provider or your previous employer to use the service. The service won't tell you if you have a pension or what its value is. But with the right contact details you can get in touch yourself to find out more.

In addition to your pensions, you might have other savings and investments that could pay you an income or you can dip in to when needed. Find out what you have, when you can access them and if there are any penalties for withdrawing money from them.

This is not an exhaustive list but could include:

• Bank accounts
• Other saving accounts
• Individual Saving Account (ISA)
• Lifetime Individual Saving Account (LISA)
• Shares or other investments like Bonds, Unit Trusts etc
• Property you own and are renting out
• Workplace savings
• Your own home
• Inheritance or money from family
• Income from continuing to work
• Claiming benefits you are entitled to

Some people fail to claim benefits they are entitled to in retirement, so do check what you may be eligible for. 

MoneyHelper has a list of benefits in retirement including ways to find out if you're eligible.

Just like your salary or wages during your working life, your retirement income will also be taxed in the same way. Whatever plan you have to take money from your pots, saving plans and State Pension, you’ll need to think about the tax you’ll pay.

• Find out more about your options for accessing your pension pot including case studies showing some example tax calculations to give you an idea of how this works.
• Learn more about income tax.

How long do you think you'll spend in retirement? People tend to underestimate the length of their retirement, but research carried out by the Office for National Statistics in 2017 shows us that people are living longer now than ever before. A man aged 65 years in the UK can now expect to live, on average, to 85.6 and a woman of the same age to 87.8.

This means that your savings may need to last longer than you think. 

Use the Office for National Statistics tool to see what this might mean for you.

Although we can help you think about what might be important for you, we'd recommend you receive personalised advice from a financial adviser. 

From age 50 you are entitled to free and impartial guidance with a pension specialist from Pension Wise, a government service from MoneyHelper. You'll talk about the options you have for taking your pension money.

You can book a free appointment online.

You can also seek advice from an independent financial adviser. Advisers usually charge for their services. You may be able to pay for financial advice directly from your pension pot. Ask your financial adviser for details. 

Your employer may provide access to free or discounted financial advice as you approach retirement, so do check with them.

Find one in your local area at unbiased.co.uk. 

You’ll need a good idea of what you want your retirement to look like in order to work out how much it will cost.

If you haven’t thought about this yet, we can help you think this through in our Picture your retirement section.

The Pensions and Lifetime Savings Association (PLSA) have created the ‘Retirement Living Standards’ to give you practical guidance, helping you work out what your retirement might cost based on three lifestyles: minimum, moderate and comfortable. These lifestyles show you what your living costs might be across six key spending areas.

• Find out more on the Retirement Living Standards website.

We’ve got a tool to help you think about your expenses might be in retirement. To help get you started, we’ve split this into 11 spending areas like household bills, food and drink, clothing, restaurants, holidays and hobbies. With this tool you can personalise the income level you might need depending on your lifestyle and what income you might have available.

• Use our tool to think about what your expenses might be.

If you want to do a more detailed budget, use the MoneyHelper budget calculator to help you think about all of your income and outgoings.

You can also add each cost as a daily, weekly, monthly or annual amount and the tool will work everything out for you to show a total summary and a breakdown.  

You can email a copy of the completed planner to yourself or download it so you can keep track and play around with different spending.

Your aspirations and the associated spending are likely to change over the course of your retirement as your lifestyle and health changes.

Write down any debts including credit cards and mortgages. Even modest debts such as an overdraft or credit card bill can make a big dent in your retirement income. So, if you can, it is generally a good idea to reduce them. If this isn’t possible, you’ll need to include these in your calculation.

The money you take out from your pension, or other assets, could be used to clear debts that you may have – such as an outstanding mortgage. You’ll need to consider what is right for your own individual circumstances and get advice if you need to.

You may also need to still pay rent, or annual fees like ground rent or maintenance. If so include these too.

If debts are becoming unmanageable it might be a good idea to seek advice. Our Manage your debt page has information and links to free advice helplines. 

Just like your life has had different phases, your retirement will too. It may be useful to think about how different your lifestyle, and therefore your expenses, will be in different decades or time periods. Here’s a suggestion, but create your budget in timeframes that work for you:

• Transition to retirement – you may still have some income from working, but may not have reached State Pension age yet. Expenses might still be high during this period and not all of your retirement income may be available to you yet. This may be the period you start on your new adventures which may need increased spending.
• +10 years after retirement – these may be your more active years where you want to explore the world or help the family out financially. You might want to move closer to family or downsize. At this time you may need to access ‘chunks’ of money to pay for these.
• >20 years after retirement – these may be the years when you start to wind down and you may need more help in later life like modifications to your home or care support. You might also want to think about any inheritances you want to set aside.

You could also think about setting aside different pots of money that’ll you need in the different phases. 

Here’s some ideas to get you started:

• Active years – money being used to pay for day-to-day living expenses in the early active years of retirement.
• Holidays and rainy days – a pot of money set aside to pay for more ad-hoc spending like holidays, a new car, home improvements, emergencies, paying off debts or helping the family.
• Later years income – a pot of money used to provide an income that you’ll receive for the remainder of your life.
• Inheritance pot – a pot of money set aside that you want to pass on.

Start by calculating the foundation of what you need; from regular travel costs, to food and heating bills, Wi-Fi packages and insurance payments, for example. Be as thorough as possible; it's better to list every possible cost at this stage and add this up. This will be the minimum that your income needs to cover and it is likely that these costs will need to be covered for the rest of your life.

The State Pension or any defined benefit pension you have are guaranteed to pay you an income for life making them ideal assets to use to meet your essential expenditure.

Think about when these will start. Will they supplement or replace other sources of income?

If you have a shortfall you should also check the availability of other benefits, including personal independence payments, council tax support, housing benefits and pension credit.

You could also make adjustments to or reduce your expenses budget.

You may be thinking about whether you can afford to retire just yet. You could consider working longer, even if this is part time. Deferring some of your pension income may also be an option. Deferring the State Pension or any defined benefit pension may increase what you're entitled to later. You can choose to leave your defined contribution scheme benefits invested beyond the age you had planned to retire. Don't forget to check the details of your specific scheme and remember to make changes to when you plan to retire.

Don't forget about any other assets you have which would help find your retirement. If you own your own home this could provide you with extra income or lump sums when you need them.

If you have income and/or assets left after meeting your essential spend, you can add in some of your more aspirational ambitions.

Your aspirations and the associated spending are likely to change over the course of your retirement as your lifestyle and health changes. Flexibility in meeting your aspirational spending needs is therefore likely to be important.