The comprehensive guide to pensions

When can I access my pension pot?

Currently, you can access your pension savings from the age of 55. However, the Normal Minimum Pension Age is set to rise to 57 in April 2028. This means that anyone born after April 1973 will need to wait until at least 57 before drawing on their pension.

Since the introduction of pension freedoms in 2015, more than £102.3 billion has been withdrawn flexibly from pension pots. Of this, around £36 billion (35%) was taken by those under 60, while a further £29 billion (28%) was accessed by people aged 60–64.

This trend highlights a key concern: while flexibility is valuable, withdrawing your pension before State Pension age (currently 66, rising to 67 by 2028 and to 68 between 2044 and 2046) can seriously affect long-term financial security.

What you need to consider before accessing your pension pot:

• Tax implications: Withdrawals above your 25% tax-free lump sum are treated as income and could push you into a higher tax bracket.
• Reduced retirement income: Accessing funds early means your pot has less time to grow, potentially leaving you short later in life.
• Inheritance Tax (IHT) changes: From April 2027, defined contribution pension pots will be included in IHT calculations, changing the way pensions are treated in estate planning. This may encourage some people to spend their pension savings rather than leave them as inheritance — but this could undermine long-term stability if not carefully planned.

For high-net-worth individuals, these issues are even more significant. Pensions are not just about funding your retirement; they’re also a powerful tool for tax efficiency, wealth preservation and inheritance planning. Accessing them without a tailored strategy can have costly and lasting consequences.

Tip: Think of your pension as more than just an income source. With the right approach, it can form a central part of your long-term wealth strategy. Always seek independent financial advice before making withdrawals.

Will my pension last throughout retirement?

A new report has revealed troubling insights into the financial confidence of retirees in the UK. Alarmingly, just under half (48%) of mid-retirees feel assured that their private pensions will sustain them throughout their lives. This leaves the remaining half grappling with uncertainty, despite decades of planning and saving. The report paints a disheartening picture of financial security in retirement.

One of the most striking aspects is the disparity in financial confidence between genders. While 32% of men reported feeling secure about their finances, only 19% of women felt the same. This underscores an urgent need to address the gender gap in retirement planning, as women are disproportionately affected when it comes to financial security in later life[1].

Call for regular financial reviews

What’s clear from the report is that many mid-retirees have adopted a “set and forget” approach to their pensions, which could prove detrimental in the long term. While retirement planning traditionally focuses on the lead-up to retirement, the findings underscore a pressing need for ongoing financial reviews during retirement itself. Just as regular health check-ups safeguard your well-being, frequent financial MOTs could play a vital role in keeping your retirement plans on track.

Don’t sleepwalk through retirement

The report illustrates how many retirees are sleepwalking through critical financial decisions in later life. They belong to the first-generation facing pension freedoms, and the complexity of these choices requires increased support and education. Without adequate planning, the risk of financial instability during the latter years of retirement poses a significant danger. Acting now can avert considerable hardships in the future.

Tip: Financial planning doesn’t stop at retirement. Ongoing management is essential to ensure your wealth supports you for life.

How much do I need to retire comfortably in 2025?

According to the latest data:

• A single person now needs £43,900 annually for a comfortable retirement.
• A couple requires £60,600 annually.

But what does a “comfortable” retirement look like?

A “comfortable” retirement is defined as one that enables financial independence and allows for the enjoyment of a few luxuries. This might mean holidays abroad, UK mini breaks, dining out, home technology and leisure spending.

For a single person, these costs total £43,900 annually after tax. To cover this, they would need a pre-tax income of £40,245, in addition to the State Pension, which is £11,973 for the 2025/26 tax year. If you’re relying on a pension pot to provide this income through an annuity, the total savings required ranges from £540,000 to £800,000.

Steps to improve your retirement outlook:

• Start early: Time is your greatest asset. Regular contributions made earlier in your career allow savings to grow due to compounding interest.
• Maximise employer contributions: Take full advantage of workplace pension schemes and match your employer’s contributions whenever possible.
• Consider investments: Diversifying your portfolio into stocks and shares ISAs or other investments may provide higher returns than a traditional pension plan, although it carries higher risks.
• Delay retirement: Working a few extra years can give your savings longer to grow and reduce the number of retirement years your funds need to cover.
• Review your spending: Budget carefully during your working years to prioritise retirement savings.

Early planning provides you with the opportunity to fully capitalise on growth over time and to confidently manage any uncertainties that may arise. Don’t leave your comfort and financial independence in retirement to chance. By starting today, you’re investing in the future you deserve.

Tip: For high-net-worth individuals, retirement planning should sit within a broader wealth strategy, balancing lifestyle goals with tax and estate efficiency.

Who will inherit my pension?

Research shows that one in six people with a partner are unsure who would inherit their pension savings if they passed away before retirement. Among older generations, the figure rises to nearly one in five.

Why this matters:

• Pensions are often one of your largest assets, comparable to your savings or other valuable possessions. Keeping its inheritance aligned with your wishes is crucial for providing financial security to your loved ones and avoiding unnecessary complications.
• Beneficiary nominations may be outdated after marriage, divorce, or job changes. When life events like marriage, divorce, or job changes occur, it’s easy to lose track of previous nominations. This can lead to outdated beneficiaries who may no longer reflect your wishes.
• While providers aren’t legally bound by your nomination, they strongly consider it in decision-making. Regularly updating your nomination can help ensure that your wishes are honoured.
• From 2027, new IHT rules will affect pensions in estate planning.

Tip: Reviewing and updating your pension beneficiary details regularly is one of the simplest ways to protect your wealth for the next generation. Most pension providers offer online methods to review and amend these details, making the process quick and straightforward. Whether online or through a paper form, it typically takes just a few minutes to confirm or update your nominee information. A small effort now can prevent emotional distress for your loved ones in the future.

What should I do if I have multiple pension pots?

With frequent job changes, it’s common to accumulate several pensions over your career. In fact, over 3.3 million pension pots worth an average of £9,470 each are believed to be ‘lost’ in the UK. Nearly a quarter of UK workers expect to change jobs in 2025, making this issue more pressing.

What happens to a pension when I leave a job?

When you leave a job, your investments stay in place. However, both your contributions and those from your employer cease. While your savings can still grow through investment, ongoing charges on the account may gradually decrease its value if not monitored.

It’s important to notify your pension provider of any changes to your personal email or home address, particularly if your work emails are deactivated. Updating your contact details regularly helps you stay informed about your savings and prevents losing contact with your funds.

How do I track down old pensions?

If you’ve had several jobs, it can be difficult to keep track of your different pension pots. You may not immediately know where all your savings are held, but tools are available to assist you. A pension tracing service can help locate any lost pensions using details from previous employers.

Once you identify these old pots, consolidation could simplify the management of your retirement savings by reducing administrative tasks and allowing you to focus on a single account. However, the decision depends on individual circumstances, and important benefits might be lost during the transfer process.

Should I consolidate my pensions?

Before consolidating pensions, assess both the advantages and possible drawbacks. On the positive side, merging pensions could lower fees, make retirement savings simpler, and provide clearer insight into your progress towards retirement goals.

However, some older pension schemes provide unique benefits, such as guaranteed income options, higher growth rates or early retirement terms. These could be lost if transferred, so research your specific plans carefully to ensure that consolidation is the right decision for you.

• Pros: Easier management, lower fees, clearer visibility of retirement savings
• Cons: Risk of losing valuable benefits such as guaranteed income or favourable retirement ages in older schemes

Tip: For high-net-worth individuals, consolidation can simplify complex wealth portfolios, but only after a thorough review of what may be lost or gained.

Why work with us?

Our Independent Financial Advice team specialises in helping high-net-worth individuals navigate complex pension and retirement decisions. We provide tailored strategies that integrate tax efficiency, inheritance planning and wealth preservation.

Disclaimer

This content is for information only and does not constitute financial advice. Pension rules are subject to change and may affect individuals differently depending on their circumstances. You should seek independent financial advice tailored to your situation before making any decisions.

Ignition House is a research consultancy specialising in market research and consulting. The report is based on an online survey Ignition House conducted with a nationally representative sample of 1,000 UK people aged 65-75 years old who hold a non-advised private pension, excluding people in receipt of state pension only and those with more than £20,000 defined benefit pension household income. Research was conducted from October to November 2024.