How to plan for retirement

The earlier you plan for retirement, the better it could be. Picture: Getty Images

The earlier you plan for retirement, the better it could be. Picture: Getty Images - Credit: Getty Images/iStockphoto

The earlier you plan for retirement, the more enjoyable it’s likely to be, says finance expert Peter Sharkey.

Initially no more than a seemingly inconsequential blip on life’s immeasurable horizon, the prospect of retirement – and the corresponding need for retirement planning – quietly, but unmistakably emerges as a matter requiring serious attention, usually when most people turn 50.

Hitting your half century certainly justifies a party and though retirement may still seem aeons away, reaching fifty also warrants slightly more than back-of-a-fag-packet-style planning for life beyond the day at which you clock off for the final time.

Leave the planning too late, say until you reach your sixties, and it’s possible you won’t have given yourself sufficient time to make a difference to your wealth, which means you could end up retiring with less money than you hoped for. Furthermore, there’s no getting away from the fact that effort is required if you’re to plan properly , but the benefits could be substantial.

To start, it’s worth contacting your old employers / pension providers and requesting an up-to-date statement showing the value of your pensions. It’s possible you will have a mix of defined-benefit (DB) and defined-contribution (DC) pensions.

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DB pensions pay a guaranteed income once you reach the scheme’s retirement age; a DC pension is determined by the level of your contributions.

In the event you cannot make contact with a previous employer, your first port of call should be the excellent (and free) Pension Tracing Service which should be able to help after you have completed an online request form at:

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At the same time, you can get an estimate of your state pension based upon NI contributions at:

The next stage in the planning process is to consider whether you want to stop working completely or move into retirement by continuing to work a few days each week. It’s also worth noting that retirement is not necessarily determined by age but by your level of income.

Calculating how much you’re likely to need during retirement is perhaps the fiddliest stage of the process because it entails calculating your current basic expenditure, from household bills and mortgage or rent payments, to commuting and other essential expenditure. Post-work, it’s possible you can exclude mortgage repayments and commuting expenses, thus giving an essential expenditure figure. Conversely, your level of discretionary expenditure is likely to rise, especially in the early years of retirement as you spend more on holidays and enjoying yourself.

Plugging shortfalls between projected income and required expenditure is a task best tackled as soon as possible because it is easier to rectify.

For example, a 50-year-old saving an extra £100 a month could accumulate £28,000 by the time she retired at 67. If the same level of monthly savings were made into a SIPP, a basic-rate taxpayer could build an additional pension pot worth more than £35,000 over the same period.

In addition to using DB pensions or the state pension to cover essential outgoings, consideration should also be given to annuities which can offer a guaranteed income for life.

The same goes for equity release, another option for those aged 55 and above.

A report published earlier this year by the Equity Release Council highlighted a growing trend for retirees to draw their income form a variety of sources, none of which should be ruled out until they’ve been fully explored.

The report noted: “The trend raises questions about whether retirees’ savings pots will last for the duration of increasingly long retirements. It highlights that a single-product solution is unlikely to sustain the level of retirement income needed to meet people’s lifestyle needs.”

It went on to suggest that property is often a blind spot in our overall wealth, a surprising observation considering how well-versed most homeowners are with property values. Perhaps it’s because people remain unsure about whether they can access the wealth accumulated in their homes or they believe it’s an expensive process. In fact, the market has developed to such a degree that equity release is increasingly used to supplement the retirement finances of tens of thousands of people every year.

Its appeal has grown for two main reasons: first, the sum homeowner(s) release is tax-free and there are no restrictions on how the money may be spent. Second, there are no monthly payments to make to access the wealth accumulated in the home over many years.

Retirement planning has, of necessity, become increasingly holistic by taking account of several possible sources of pension income. To dismiss any of them before investigating their advantages and disadvantages further would not only be folly, it could also prove enormously expensive.

Drop Peter Sharkey a line!

Readers can email Peter Sharkey (and his team of equity release experts) to ask any equity release-related questions. Contact Peter by emailing:

As many readers have already discovered, there’s a wealth of information to be discovered at: . In addition, there are hundreds of blogs and articles dealing with the subject on the Moneymapp website, including Peter Sharkey’s weekly blog, rated among the UK’s very best. Read more at:

You may still email any queries or questions regarding equity release to:

Please note that neither or Peter Sharkey can advise readers on whether equity release is suitable for them. However, both and Peter can introduce readers to professional advisers who will explain the process and its implications for your estate and entitlement to means-tested state benefits.


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For more financial advice, check out Peter Sharkey’s regular column, The Week In Numbers.

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