Our series on navigating the transition to retirement gives you a detailed look at how we could support you as you enter this exciting new phase of life.
Last month, the first part of the series explored how we will discuss your goals and assess your current financial position to determine what kind of lifestyle you might lead in retirement.
Once we have an idea of what your retirement will look like, we’ll need to review your savings and consider how you can generate an income in later life.
This month, in part two of the series, you can learn more about why organising your pensions is so important, and how we can help with this.
There are an estimated 3.3 million unclaimed pension pots in the UK
Since the introduction of auto-enrolment, starting in 2012, businesses are legally obliged to enrol employees who meet certain earning requirements in a pension.
It’s up to the business to decide which pension scheme they pay into. As a result, if you start a new job, you might contribute to a new pension, meaning the old one is left dormant. The savings are still yours, but you no longer pay into the pot.
Throughout the course of your working life, this might mean you build savings in several different pension pots, some of which can be easily forgotten.
Indeed, according to Pensions Age, there were an estimated 3.3 million unclaimed pension pots in the UK in October 2024.
We can help you track down any lost pensions, so you have a clear picture of all the savings at your disposal.
More importantly, we can review each of your different pensions to determine whether they are suitable for you and your retirement plans. After assessing a pension pot, we might recommend:
- Leaving it as it is
- Making changes to the existing scheme, where possible
- Consolidating it with another of your pensions
- Opening a new pension and moving the savings.
Our recommendation will depend on the specific details of the pension and there are several factors we will consider.
Many providers move your pension into “lifestyling” as you approach retirement
As you approach your chosen retirement age, many pension providers automatically move your savings into lower-risk funds. This is a process known as “lifestyling”.
In the past, this may have been beneficial if you planned to use some or all your pension savings to purchase an annuity – an insurance product that provides a guaranteed income for a set period, sometimes the rest of your life.
By moving your savings into a low-risk fund, you could reduce the chances of your investments falling in value before you purchase your annuity. Crucially, you may no longer be concerned about growing your pension savings if you spend most or all of the pot on your annuity.
However, annuities are not as popular as they once were. Instead, you may choose to flexibly access your pensions and make withdrawals over time.
In this instance, you may need your pot to continue growing so the value of your savings keeps pace with inflation, and you can continue making withdrawals throughout retirement.
This is especially true as life expectancies increase and you may need to fund yourself for longer than first thought.
As such, lifestyling might not be the most suitable option because low-risk investments typically generate lower returns. Consequently, you could deplete your savings faster and may be more likely to run out of money in retirement.
Conversely, if your savings remain invested in funds that aim for medium- to long-term growth, you may generate higher returns. As a result, your pension savings could grow faster, potentially meaning you can make greater withdrawals and live a more comfortable lifestyle throughout retirement.
When we review your pensions, we will see whether they have been moved into lifestyling and assess the overall performance of your investments.
We can then move your savings, if necessary, so you’re more likely to achieve steady growth throughout retirement.
The fees and charges on your pensions could vary significantly
As well as considering the level of growth you could achieve on your pension savings, we will also check the various fees and charges associated with the scheme.
Most pension providers charge fees for managing your investments and administering the scheme, and these costs can vary significantly.
If you’re paying very high fees, this could eat into the growth you achieve and reduce the amount of wealth available to withdraw and fund your retirement.
We will compare the fees and potentially move your savings into a more affordable scheme, so you retain more of your wealth.
The options for accessing your savings and passing wealth to loved ones may differ
The way that you can access your pension savings depends on the scheme.
In most cases, you can start drawing from your pensions at the “normal minimum pension age” of 55 (rising to 57 from 2028).
If you have a defined contribution (DC) pension, you build savings in a pot during your working life. At 55, you could then purchase an annuity, draw flexibly from the pot, or a combination of the two until you’ve spent all your savings.
Alternatively, you might have a defined benefit (DB) pension – sometimes called a final salary pension – which pays a set income for the rest of your life. Each DB scheme has its own rules about when you can start receiving payments, but it is often between 60 and 65.
While many pensions will follow these basic rules, there are exceptions.
For example, some pensions may allow you to access your savings before 55. You might also have access to additional benefits, such as payments for your spouse when you pass away.
On the other hand, certain schemes might have limitations to consider. While you can normally pass a DC pension to your loved ones when you’re gone, DB pensions may not allow you to do this.
It’s important to consider the level of income you need to generate each year to fund your desired retirement, and whether your pensions are structured in a suitable way to achieve this.
By reviewing your pensions, we can ensure that you’re able to draw the income you need to fund your lifestyle and pass any remaining wealth to your loved ones. We’ll also consider the additional benefits you receive from certain schemes to make sure you retain them.
Our support gives you control over your pension savings
You could have multiple pensions which may or may not be organised in a suitable way to allow you to achieve your dream retirement.
With our support, you can make changes to your pensions so you’re able to draw the necessary income for the rest of your retirement.
Next month, the final part of the series will explain the ongoing support we offer once you transition to retirement so you can deal with any potential challenges.
Get in touch
If you need support with your retirement plans, we are here to help.
Please give us a call on 01276 855717 or email info@braywealth.com today.
Please note
This article is for general information only and does not constitute advice. The information is aimed at retail clients only.
All information is correct at the time of writing and is subject to change in the future.
The value of investments and any income from them can fall as well as rise and you may not get back the original amount invested.
A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available.
The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts.
Your pension income could also be affected by the interest rates at the time you take your benefits. The tax implications of pension withdrawals will be based on your individual circumstances, tax legislation, and regulation, which are subject to change in the future.
Approved by the Openwork Partnership on 02/07/2025
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