Retirement is one of the biggest financial decisions you’ll make, and the choices you make in the run-up can shape your income for decades. The good news: you don’t need to have it all figured out today. You just need to know what to look at.
Here are four things worth getting on top of as you head towards retirement.
1. Get your pension admin in order
Start by knowing what you’ve got. Most people have a mix of three types of pension:
- State Pension: paid by the government. How much you get depends on your National Insurance record.
- Workplace pensions: set up by your employer. These are either defined contribution (a pot that’s invested and grows over time) or defined benefit (a guaranteed income based on your salary and years of service).
- Personal pensions: ones you’ve set up yourself, such as a SIPP, or where you’ve combined old workplace pots.
Lost track of an old pension? You’re not alone. The government’s Pension Tracing Service can help you find contact details for schemes from past employers, so you can check what you’re owed.
How much will you need? The Retirement Living Standards give a useful benchmark for yearly spending in retirement, assuming you own your home outright:
| Lifestyle | Single | Couple | What it looks like |
| Minimum | £13,900 | £22,500 | A week’s holiday in the UK |
| Moderate | £32,700 | £45,400 | A fortnight in the Mediterranean each year |
| Comfortable | £45,400 | £62,700 | A fortnight abroad plus three UK breaks a year |
These are spending figures, so you may need a higher income once tax is taken into account.
2. Check your State Pension and National Insurance record
The full new State Pension is currently £241.30 a week (2026/27). It’s a valuable foundation, but on its own it’s unlikely to fund a comfortable retirement.
When you get it: State Pension age is 66, but it’s rising to 67 between 2026 and 2028. You can check your State Pension age on GOV.UK.
How much you get: this depends on your qualifying years of National Insurance (NI):
- Fewer than 10 years: usually nothing
- 10 to 34 years: part of the full amount
- 35 years or more: the full amount
You can check your State Pension forecast online to see your record and any gaps.
Got a gap? You may be able to fill it with voluntary Class 3 contributions. These cost £18.40 a week in 2026/27, or £956.80 for a full year. Each extra qualifying year could add around £358 a year to your State Pension. You can usually only fill gaps from the past six years, and it isn’t worth it for everyone, so check your forecast before you pay.
3. If you have a defined benefit pension
Defined benefit (DB) pensions pay a set income for life. Before you start drawing yours, these are the key things to understand:
- Tax-free cash: you may be able to take a tax-free lump sum, up to the lump sum allowance of £268,275. The more you take, the lower your income for the rest of your life.
- Commutation factor: this is how much lump sum you get for each £1 of yearly income you give up. At 10:1, giving up £1 of income gets you £10. Whether a factor is good value depends on your circumstances, so ask your scheme for the figures and think about how much income you’d be giving up over your retirement.
- Inflation protection: many schemes increase your income over time, both before and during retirement. Each scheme is different, so ask your administrator how yours works.
- Death benefits: DB schemes can leave less behind for loved ones. Check what percentage of your income would be paid to a spouse or child.
4. If you have a defined contribution pension
With a defined contribution (DC) pot, you have four main ways to access your money. You can usually take up to 25% tax-free, and the rest is taxed as income.
- Annuity (guaranteed income): use your pot to buy a guaranteed income for life, or for a fixed period.
- Drawdown (flexible income): keep your pot invested and take money out as and when you choose.
- Smaller lump sums: take cash in chunks. Each withdrawal is 25% tax-free and 75% taxable.
- One lump sum: cash in your whole pot in one go. This could push you into a higher tax band.
| Annuity | Drawdown | Smaller lump sums | One lump sum | |
| Regular income | Yes | Yes | Potentially | No |
| Guaranteed income | Yes | No | No | No |
| Could you run out? | Not with a lifetime annuity | Yes | Yes | Yes |
| Can unused funds be passed on? | Depends on the plan | Yes | Yes | Likely |
From April 2027, most unused pension funds will count towards your estate for inheritance tax.
How much can you take without running out? One rule of thumb is the “4% rule”. You take 4% of your pot in year one, then increase that amount by inflation each year. On a £500,000 pot, that’s £20,000 in year one. It’s a starting point, not a guarantee. You might take more after good years and less after weaker ones.
Remember, retirement can last 20 to 30 years. If your pot stays invested, it has time to ride out ups and downs, but its value can fall as well as rise.
This article is for information only and isn’t financial advice or a personal recommendation. It doesn’t take your individual circumstances into account. The value of investments, and any income from them, can fall as well as rise, so you may get back less than you put in. Tax rules can change and their effects depend on your circumstances.
