If you are approaching retirement, you might be wondering what actions you can take now to make your transition into the next part of your life as smooth and hassle-free as possible.
It pays to be well prepared for retirement, as the decisions you will soon be making will go on to affect you for the rest of your life.
Follow this handy ten-point plan for retirement and you will soon be on your way to enjoying your well-planned and well-informed retirement journey.
Work your way through this handy retirement checklist…
1. Collate your pension policies
According to Age UK, the average person over 65 works for around 6 employers during their career, so you may have accumulated a number of smaller pension pots over the years.
When you arrange your retirement income you can consolidate these smaller pension pots into one larger fund, which could gain you access to a better rate for your retirement income. However, before transferring your existing policies, you should check if they have any valuable benefits or penalties which would impact their value on transfer.
Start by going through your old pension documents, check your details are up-to-date and ask each provider for your latest statement. Can’t remember who all your policies are with? Call the Department of Work and Pension’s tracing service on 0345 6002537.
2. Lessen the risk
In the last ten years of your career, to help mitigate big fluctuations in the value of your fund, you may start to move your pension fund into lower risk investments; especially if you plan on buying an annuity.
Your existing provider(s) might have done this automatically for you, but if they have not then it might be worth moving them now to better protect the fund you have built up.
3. Work out your retirement income
You need to have an idea of how much income you are likely to get in retirement. This will help you later with budgeting and deciding when a realistic retirement date can be set.
Once you have all your statements from your current pension provider(s), then get a quote for your pension income. For ease, use this link for the highest quotes from the UK’s leading providers – it only takes a few seconds.
Find out how much State Pension you qualify for, too, and if you have any gaps in your National Insurance record then look into how much extra you could get if you make voluntary contributions.
It is important to know how much you will have to live on when you retire, so preparing a budget is essential in your build-up to retirement.
When calculating your incomings and outgoings, remember you will save money on not having to make the daily commute or buy lunch every day, but on the flipside your energy bills could increase significantly with the extra time at home. If your retirement budget is looking slimmer than you hoped, try to identify areas that you can start cutting back on.
5. Get a health check
Nobody wants to be told they have a health condition, but if you do have a commonly diagnosed health issue, such as high blood pressure or high cholesterol, for example, then it will benefit you to know about it sooner rather than later.
Firstly, you can start taking any necessary medication to prevent the condition becoming more serious. Secondly, and of real importance for your future level of retirement income, a health or lifestyle issue (such as smoking) can entitle you to a bigger income for life as you may qualify for enhanced terms on your annuity.
Over 60% of retirees qualify for enhanced terms – and a bigger income for life. Bear in mind that only a limited number of providers offer enhanced annuities, so your current pension provider might not do so (read no.8 about how you can address this issue).
If you find out about a health condition after you have arranged your annuity, it would be too late to benefit from any enhanced terms, so it really can pay to have a health check beforehand.
6. Reduce debts
Whilst interest rates for savers are historically low, there appears to be little relief for those paying off mortgage or credit/debit card debts. It may pay to clear them faster now, while you have the benefit of a salaried income.
You could also consider switching or arranging balance transfers now while you are able to, or consider using your savings or the tax-free money from your pension fund to help reduce debts.
7. Decide on your retirement date
If you are an employee, your contract of employment usually dictates your retirement age but you can access your retirement income any time you wish after you reach 55 and before you retire. You may choose to work for longer and perhaps build up a larger pension fund by making larger contributions with the benefit of income tax relief. For the majority of people, the taxman will contribute at least 20% of the value of your contributions.
8. Contact a retirement income specialist
A few months before your nominated retirement date within your pension policies, your current pension provider(s) will send you an information pack informing you of your choices and the level of income they can offer – but remember, this is only based on their own annuity rates and the products they have available.
At this point you should contact our retirement income specialists who will search the market to find you the highest rates, which can be considerably higher than that offered to you by your current provider due to the highly competitive annuity market and the opportunity for you to enjoy enhanced annuity rates.
Seeking the guidance of a retirement income specialist like Retirement Line means they will shop around for your highest pension income so you are not limited to what your current provider offers.
You will also receive a free policy review to identify any hidden benefits or penalties which can drastically affect how much you will be paid.
9. Understand the different types of annuity available to you
Once you have spoken to our retirement specialists, you will be sent a report explaining the different types of annuity, the best quotes and the range of options available to you.
When considering your options, it is important to assess your attitude to risk. If you want to avoid any risk, a lifetime conventional annuity offers a guaranteed income for life which is not affected by future annuity rate changes or investment returns. If you have any medical conditions or lifestyle issues (such as smoking), you could qualify for an enhanced annuity income which can result in a substantial increase.
Alternatively, if you don’t want to commit to a lifetime annuity now, you can take your 25% tax-free cash with or without any income and after a period of a few years (which you select), you can reconsider your options again then.
Finally, you could consider an investment linked annuity, which offers the potential for increasing income to combat inflation – but this carries investment risk and may not be attractive to cautious investors.
Ask our Retirement Line specialists as many questions as you like to ensure you are making a fully informed decision.
10. Why Retirement Line?
We appreciate that deciding on how to arrange your retirement income is extremely important to you and we pride ourselves on offering our clients an experienced and helpful service with the greatest of care and empathy.
Once you have decided how you wish to take your retirement income, our specialists will take care of everything for you. Irrespective of how much we assist you in providing information about your options and annuity quotes, we do so without charge or any obligation to use our service.
If you decide to proceed and buy an annuity through ourselves, there is no direct fee to pay for our service, as we will receive commission from your chosen provider which is taken into account in the income you are offered.