Five things to consider before you retire

There's no single moment when retirement planning starts in earnest, but the five years or so before you stop working tend to be when small decisions compound into big differences. Here are the questions we find come up most often in conversations with clients who are within striking distance of finishing work.

1. Do you actually know what you've got?

It sounds basic, but a surprising number of people approach retirement without a clear picture of all their pensions. That's especially true if you've changed jobs several times — each employer's scheme may still be sitting somewhere, possibly with old contact details, possibly with charges that have crept up over the years.

Step one is to track them down. The government's Pension Tracing Service can help find lost pensions; your own records and old payslips fill in the rest. Once you know what's there, you can ask the more useful question: are these pensions still appropriate? Charges, investment performance, the death benefits available, and how easily you can take flexible income all vary considerably between providers and between vintages of contract. Some old pensions have valuable guarantees written in (guaranteed annuity rates, for example) that can be worth a great deal.

2. What will the State Pension actually give you?

The full new State Pension is £11,973 a year in 2025/26 — meaningful, but not enough on its own for most people. To get the full amount, you generally need 35 qualifying years of National Insurance contributions; you may have fewer than you think, especially if you've spent time abroad, were self-employed, or had career breaks.

You can check your State Pension forecast online at gov.uk in a few minutes. The forecast tells you what you're on track to receive and what years are missing. In some cases, you can fill gaps by paying voluntary National Insurance contributions — Class 3 contributions cost around £900 to add a full year, which (in current terms) buys around £330 a year of State Pension for life. Whether topping up is worth it depends on how many years you're short, your age, and your expected longevity, but for many people it's one of the best-value financial decisions available.

3. What will retirement actually cost?

It's tempting to assume retirement will cost less than working life — no commute, no work clothes, fewer lunches out. In practice, the early years are often more expensive, not less. Holidays, hobbies, helping children, replacing a car, doing things to the house — all of those tend to cluster in the first decade after retiring.

A useful starting point is the Pensions and Lifetime Savings Association's Retirement Living Standards. The 2025/26 figures suggest £31,300 a year for a Moderate retirement and £43,900 a year for a Comfortable retirement, for a single person outside London. They're national averages, not your number — but they're a sanity check. We've written more about how to build your own number in our retirement income article.

4. How will you take your tax-free cash?

You can normally take 25% of your pension as a tax-free lump sum (subject to a cap of £268,275 in most cases). But the timing and the manner of taking it matters more than people often realise.

Take it all at once and the money sits outside the pension wrapper — losing the tax-protected growth, and (from 6 April 2027) becoming part of your estate for Inheritance Tax purposes whether or not it's spent. Take it gradually, alongside taxable income from drawdown or annuity, and you can structure income tax-efficiently across the basic and higher rate bands. There's no single right answer, but it's worth modelling the alternatives rather than defaulting to 'take it all on day one'.

Tax treatment depends on individual circumstances and may be subject to change in future. Tax-free cash rules in particular have changed twice in the last decade.

5. Have you protected the plan against the obvious risks?

Most retirement plans assume both partners live broadly as expected and stay broadly well. Both assumptions are worth stress-testing.

If one of you died early, what happens to the household income? If one of you needed care later in life, where would the money come from? If a major fall in markets coincided with the first few years of retirement, would the plan still hold? These aren't pleasant questions, but they're easier to answer with five years to act on the answers than with five months. Solutions vary — life cover, income protection, an inflation-linked element of guaranteed income, a cash buffer, downsizing the house — but addressing them deliberately tends to produce a more resilient plan than ignoring them.

When to start the conversation

Five years out is ideal; ten years is better still. Even three years gives meaningful time to adjust pension contributions, fill State Pension gaps, restructure investments, and put protection in place if needed. The closer you get to retirement, the fewer levers there are to pull — so the time to plan is when you can still change things, not after.