Guide to Retirement Planning in the UK

Retirement planning is a vital process to securing a comfortable lifestyle after leaving the workforce. Discover how to prepare with these six easy steps.

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Retirement planning is a vital process to ensure pensioners don’t run out of money after leaving the workforce. And the more prepared you are, the more comfortable the lifestyle you can enjoy. 

In most cases, the sooner you start the retirement planning process, the better things can be. After all, by establishing clear goals years or even decades in advance, you can work out what’s needed while money is still rolling through the door.

That’s why someone who’s just graduated from university and has just joined the workforce can benefit from planning early. But what exactly do you need to consider? Here are six simple steps to securing a better retirement.

1. Outline your retirement goals

The first step is to figure out exactly what sort of retirement lifestyle you desire. Outlining goals can establish how much capital you will need. It also helps identify which types of saving or investment vehicles will be the most suitable.

Retirement goals can be as outrageous or simple as anyone wants. That’s because objectives can be adjusted over time after reviewing whether they are realistically achievable.

Some common examples of retirement goals include:

  • Live in luxury: be able to go on frequent luxury holidays around the world, staying in the finest hotels and resorts.
  • Passion projects: have the financial capacity to renovate a house, learn a new skill, design a garden, or go on expeditions.
  • Support family: provide financial support to children, grandchildren, or other family members to help them achieve their own goals in life.

2. Decide when you’d like to retire

With a retirement goal or goals in mind, individuals now need to decide when they want to achieve these objectives.

Determining a time horizon is critical. An individual with another 20 years to go has far more flexibility in choosing suitable types of investments than someone five years away from retirement. And thanks to compounding, the further in advance savings begin, the more likely it will be to achieve goals on time.

However, someone just a few years away may be better served by maintaining wealth and building a stream of passive income that is less volatile than a growth-focused investment portfolio. After all, there’s nothing worse than investing life savings just before a stock market crash. 

3. Determine how much money you’ll need in retirement

Spending patterns constantly change. However, there are some common monthly expenses that have a habit of being fairly consistent. And planning a budget to reflect these more predictable expenses is vital in determining how much money will be needed.

Expenses can be placed into two primary categories:

  • Essential: these expenses cover everything a pensioner can’t live comfortably without and include items such as food, utilities, electricity, housing, travel, and other day-to-day costs.
  • Non-essential: these expenses are more discretionary and include items like subscription fees, eating at restaurants, going on holiday, and other leisure activities.

With a rough budget in place, retirement planners can get an estimate of how much money they’ll need each month to support their desired lifestyle.

4. Work out your likely retirement income

As retirement inches closer, it’s a good idea to regularly review whether savings, investments, and other pension instruments are on track to deliver the required level of income. 

If retirement savings are falling further behind, individuals can adjust their strategy or goals before it’s too late. Similarly, suppose an individual’s pension pot is growing faster than expected. In that case, they may be able to update their retirement goals to be more luxurious.

Some common items to check when working out a likely retirement income include:

  • Getting a State Pension statement to see how many more contributions are needed to unlock the full amount.
  • Getting a statement from any private pension with an employer to see the likely level of passive income it will eventually generate.
  • Looking at the level of savings and investments in various personal financial accounts.
  • Tracking down any lost workplace pensions from previous employers.
  • Reviewing other sources of income, such as rental real estate, and whether they will continue to provide cash flow after retirement.

5. Begin preparations

In the last few years, before retiring, it’s important to have everything prepared. 

Most professional retirement planners advise eliminating or reducing any outflows of capital. This means paying off any outstanding debts. These could be from personal loans, credit cards, or a mortgage. 

Now might also be the time to start adjusting an investment portfolio to eliminate risk. With preserving capital becoming more important than capital growth at this stage, moving the capital from high-risk growth stocks to lower-risk income shares is often a sensible idea.

6. Seek professional help

Retirement planning is an ongoing process. And starting early with simple strategies like saving and investing can be immensely rewarding in the long term. However, as the retirement deadline draws near, talking to a professional retirement planner is prudent.

Fortunately, individuals aged over 50 have access to Pension Wise.1 It’s a retirement planning service backed by the UK government that provides free retirement advice about utilising a pension pot.

Article Sources


  1. Money Helper, "Pension Wise".

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