Get ready to retire
There's a lot to think about when retirement is on the horizon. For some people it's an exciting time, while others might feel intimidated by all there is to arrange. If you're in the latter camp, don't worry – retirement is a big step change in life, and it's completely normal to have a few concerns.
Ideally, you should plan your retirement at least six months in advance. This guide will take you through the necessary steps.
Step one: Decide when to retire
This is one of the biggest decisions of all, and is likely to have a big impact on your finances. For many people, this will be at their State Pension age – this depends on your gender and the year you were born, and you can calculate it here on Gov.uk. Currently, it's normally around age 65.
If you've built up a workplace pension, you can normally start drawing money from it at age 55 – so in theory, you can retire as early as 55. You can also keep working past the State Pension age, and draw your State Pension while you work if you want to, or defer it and get a bigger pension when you do retire.
As you can see, there are many options when it comes to deciding when to retire. As a general rule, the earlier you retire, the smaller your pension pot will be – although some people plan ahead by increasing their contributions while they are working.
You don't have to decide on a retirement age now – but the earlier you start planning your retirement, the more options you'll have. It may also be a good idea to have a health checkup at this stage – your GP can advise you on how many healthy years you're likely to have ahead of you.
Step two: Evaluate your finances
At least two main potential sources of finance should be considered when planning your retirement: your pension pot, and your home. You can get a free State Pension forecast here on Gov.uk, and if you have a private pension, you should receive an annual update on how much you've built up.
Make an inventory of any other sources of finance you have, including any savings and investments you have made. Together, this should provide an idea of how much income you can expect when you retire. If you don't think it's going to be enough, now's a good time to think about how you can supplement it: for a more detailed look at how to do this, see our article Can I afford to retire?.
If you own your home, you may wish to consider this among your assets when you're evaluating. You may be able to add to your retirement income by downsizing or, if you want to stay in the same property, through equity release.
You should also consider getting financial advice from a professional. There’s also the opportunity to at the very least, take advantage of the free consultation offered by the government's Pension Wise service.
Step three: Notify people about your retirement
Contact your current and previous pension providers six months before the date you plan to retire, and let HM Revenue and Customs know four months beforehand.
The right time to notify your employer will depend on their policy, but in general, the earlier, the better – this will give you plenty of time to use up any holiday, and take full advantage of any retirement policies they have.
You may also want to announce your retirement to family and friends early on, so that they know what to expect over the next few years.
Step four: Decide where you want to retire
If you're planning on staying in the UK when you retire, you can skip this part – but if you're retiring abroad, you should notify the Department of Work and Pensions so that you can claim the State Pension in your country of residence. Bear in mind that if you're planning to take part of your pension as a lump sum, the tax rules in your destination country may apply, rather than the UK's 25% tax-free lump sum.
Step five: Get the benefits you're entitled to
Getting older isn't all bad – you can register for a free bus pass once you reach the State Pension age, a Senior Railcard at age 60 and a free TV license at age 75!
You may also be eligible for pension credit if you are on a low income, which will top up your state pension up to £155.60 if you're single, or £237.55 for a couple. Other benefits you might be entitled to include:
- Winter fuel payment (up to £300)
- Cold weather payment (£25 for each seven-day period of cold weather between November and March)
- Free prescriptions, eye tests and dental treatment
- Council tax benefit – this can be as much as 100%
The charity Age UK provides a fuller list of all the benefits and entitlements you might be able to claim.
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