Most of us understand, in a general sense, that saving for retirement is important. Keeping existing retirement savings – such as pensions – under regular review is a sensible step that everyone should take, irrespective of their stage of life.
The years immediately preceding retirement, however, demand much greater attention. Decisions made during this period are among the most complex and consequential, as they often have financial implications that last for the remainder of your life.
It is important to remember that your date of retirement is never fixed, and in some instances may arrive sooner than anticipated due to unforeseen circumstances. Redundancy, ill health, or a change in family circumstances can all bring retirement forward unexpectedly. Those who have already reviewed their position, consolidated their plans, and considered their options are far better placed to adapt than those who had assumed they had more time.
Take pension reviews to the next level
In the years before your intended retirement date, it is essential to understand your existing pension provisions. Obtaining up-to-date valuations and collating multiple pensions that most people accrue during their working life is an obvious first step to take. Fully understanding the pension income options at retirement offered by each plan is equally important. Many older style arrangements may not be able to offer the flexibility provided by modern pension contracts, and reviewing these at an early stage can help identify plans with limited options and allow timely action if necessary.
As retirement approaches, it is also important to review the investment strategy adopted within each plan. If investment markets suffer a downturn in the period immediately before you retire, this could have a lasting impact on your retirement income if your portfolio is not positioned to manage that risk.
To protect against this, most workplace pensions now adopt a lifestyle investment approach, which automatically reduces the level of risk within the investment strategy as you near retirement; however, this strategy is prescribed and may even be detrimental to longer-term pension income if the strategy does not fit your plans.
For example, a strategy that aims to purchase an annuity at retirement would have a very different risk profile in the lead up to retirement than a strategy designed for transition into Flexi-Access Drawdown at retirement. Furthermore, the schedule of risk adjustment and scheme’s normal retirement date may not align with your plans. This could result in the portfolio either carrying excessive risk in the years approaching retirement, or conversely holding too little in equities, leading to missed growth potential.
Defined Benefit pensions – call to action
The need to review pensions well in advance of retirement is not limited to those with personal pensions. If you hold a Defined Benefit pension — sometimes called a final salary scheme — the rules of the scheme will largely govern what you receive and when; however, the administration of these pensions can be slow, and in some cases has become significantly slower in recent years.
Some public sector pension schemes carry substantial backlogs, which could lead to delays in receiving Tax-Free Cash and pension income after applying to take benefits. This has been particularly acute within the Civil Service Pension Scheme, where Capita took over administration of the pension scheme in December 2025. Inheriting an extensive backlog, the company are aiming to work through outstanding pension claims as quickly as possible, although delays persist. The Government have indicated that pension members experiencing unacceptable delays may be entitled to compensation; however, this may be of little immediate assistance to those without an income during the intervening period.
State Pension applications
The State Pension sits at the foundation of most people’s retirement income. From 6th April 2026, the full new State Pension is currently worth around £12,547 per year, and under the triple lock it is protected to increase each year by the highest of inflation, average earnings growth, or 2.5%. It is, therefore, worth protecting your entitlement to it carefully.
Practical steps to take include checking when you reach State Pension Age and reviewing your National Insurance record in advance of retirement, to identify any gaps. These gaps could be filled to help you reach the 35 qualifying years of contributions needed to benefit from the full new State Pension.
Many reaching State Pension age do not appreciate the need to apply for the State Pension payments to commence and assume the payments will automatically start when reaching State Pension age. As there is also the option to defer payments, individuals must actively apply to start receiving the State Pension. An invitation letter is sent out by Government approximately four months before reaching State Pension age, providing details of the online and telephone application routes.
Advice is key
Deciding when to retire is a daunting proposition as it marks the end of one chapter in your life and the beginning of another. Financial decisions taken at this juncture require careful consideration, and as outlined above, taking control of the process at an earlier stage than you might expect can yield substantial benefits. Given the importance of making the right decision with retirement savings, independent financial planning advice can really add value at this crucial stage. Our experienced advisers can take a holistic view of your plans and help you take the most appropriate action to meet your goals in retirement.
If retirement is on the horizon — whether that means two years away or ten — now is the right time to start getting your plans in order. The earlier you begin, the more options remain open. Speak to one of the team to start a conversation.
