Your 6-step retirement financial checklist

Important information - please remember that the value of investments and the income from them can go down as well as up, so you may not get back what you invest. Before transferring a pension, compare all the benefits, charges and features and always seek advice if you are unsure.

If you’re considering moving into retirement you might be thinking about giving up work or cutting down your hours, planning a big trip, spending more time on hobbies, or something else entirely. Whatever your plans, it’s a good idea to check you’re financially fit for the lifestyle you want.

From the age of 55 you’ll probably already be considering how and when to take money from your pension (rising to 57 from 2028). But there are other things to weigh up too. So, we’ve put together a simple checklist to help you decide if now’s the right time to move into retirement.

1. Check what income you’ll receive

Your retirement income is likely to come from many different places. You’ll need to consider these, so you can effectively plan ahead.

• The State Pension – the amount you get depends on your national insurance contributions (NICS) record. The government provides a forecast of how much this will pay you and if you’ve any gaps in your NICs record
• Workplace pensions – these are pensions set up on your behalf by employers.  Your pension providers can give estimates of what they are worth and, commonly, an idea of the income you can expect
• Personal pensions – these are pensions you set up yourself.  Just speak to your pension providers to find out how much they’re worth
• Other savings – you might have ISAs, shares, premium bonds or other savings. Even if they’re not specifically ‘for retirement’, keep them in mind for the years ahead.

It’s also possible that you’ll have an income from property – perhaps through downsizing or renting out a second home. You may have a business to sell too which could boost your finances. Finally, don’t forget that income from a pension is usually taxable and so you may have to pay some tax on what you receive.

2. Work out how much income you’ll need

We all have plans for our retirement – foreign holidays, new hobbies, for example – but do you know how much your lifestyle will cost?

Our easy to use retirement calculator lets you see, at a glance, how much income you could need.

3. Mind the gap

If there’s a shortfall between what you’ll receive and your planned spending, then you’ll have to think about your options. What you choose to do is likely to depend on how close you are to retiring:

• Consider paying more into your pension. Contributions to personal pensions get a 20% tax relief boost from the government, with the potential for more if you pay tax at a rate higher than the basic rate.
• Boost your State Pension – you may be able to fill in gaps in your National Insurance record by making voluntary contributions.
• Work for longer – a few extra years can make a huge difference to your retirement income.
• Delay taking your tax-free cash – from age 55 (57 from 2028), you have the option to take some tax-free cash from most pensions (we cover this below). But leaving it invested could help your pension grow if your investments do well, though this is not guaranteed.

4. Decide whether to take your tax-free cash

Many pensions allow you to take up to 25% of your savings as tax-free cash. This is appealing to many retirees but there are things to consider. The income you’ll receive from your remaining pension will be lower, for instance. Find out more about taking tax-free cash.

5. Think about how you’ll access your pension

There are three main ways of taking money from your pension (you can choose one or a combination).

• Pension drawdown – this gives you the flexibility to take whatever income you want and to change it when you need to. You can take up to 25% as a tax-free lump sum straight away or in stages.
• Taking lump sums – you can take lump sums from your pension pot as and when you need to.  25% of each lump sum will be tax free, 75% will be taxed as earnings.
• Annuities – these usually pay a lifelong, regular income that is guaranteed to last as long as you live. You can take up to 25% as a tax-free lump sum before you set up your annuity.

6. Bring your pensions together

If you’ve built up several pensions over your working life, bringing them together in a Self-Invested Personal Pension (SIPP) can help you take control of your pension savings  making them easier to manage, particularly when it comes to taking a retirement income. SIPPs can offer flexible income options at retirement and could potentially save you money - if the service fee is lower than what you're currently paying.

Each option has pluses and minuses. It’s important to consider these carefully before deciding which one – or combination – to choose. More on how you can access your pensions.

Important information - tax treatment depends on individual circumstances, and all tax rules may change in the future. Withdrawals from a pension product will not normally be possible until you reach age 55 (57 from 2028). It’s important to understand that pension transfers are a complex area and may not be suitable for everyone. Before going ahead with a pension transfer, we strongly recommend that you undertake a full comparison of the benefits, charges and features offered. To find out what else you should consider before transferring, please read our transfer factsheet. This information is not a personal recommendation for any particular product, service or course of action. If you are in any doubt whether or not a pension transfer is suitable for your circumstances we strongly recommend that you contact Fidelity's retirement service on 0800 368 6891 or refer to an authorised financial adviser of your choice.