Holly Mackay founded Boring Money in 2015, an independent investment website. With over 25 years of industry experience since graduating from Oxford, she’s a two-time Investment Woman of the Year winner, a regular media commentator and a serial entrepreneur, selling her first business in 2014. Holly’s mission is to help ‘normal people’ to understand investments, frequently appearing on major news networks and writing for national publications.
No-one quite believes that they have hit the big 5-0 – it sounds much older than we feel! Although we might have made some progress with property and savings, it’s also a time when retirement doesn’t feel like too far away, which can mean that panic sets in as some of the numbers flying around feel pretty large. There is still time to make some changes which could have a big impact on the years ahead.
So here’s the good news. You’ve still got time to get your finances in shape. And the need to get your head around pensions is now! If you’re in your early 50s, you’re only a few years away from being able to dip into a personal pension at 55 (rising to 57 in 2028).
So, what could you be doing now to make sure your next decade starts on the right financial footing? Whether you’re still building up your pension, thinking about how to juggle different income sources, or just trying to get your head around what retirement might actually look like, now’s the time to get organised. Because a few smart moves now could potentially make a big difference later.
1. Pin down your retirement plans
Tot up all your assets
Before you start making big retirement plans, it’s a good idea to get a clear picture of all your assets. What have you got today? Your pension might be a key part of your income, but it’s not the only thing that counts. You may also have ISAs, savings accounts, rental properties, cryptocurrency or an investment portfolio. The first step is to list everything you own and work out what it’s worth.
Start by gathering statements for your pensions and investments. Get a State Pension forecast from hmrc.gov.uk. Check your workplace pension – what about previous jobs?
Check how much you’ve got saved, where it’s invested, and what returns you’re getting. Then, look at any other sources of income – such as rental earnings or dividends – and note how much they bring in. If you have savings, consider whether they’re working hard enough for you (not sitting in a feeble current account somewhere) or if they could be better invested elsewhere.
Once you’ve pulled everything together, think about how and when you’ll use each asset. Some might be best left to grow, while others could provide income straight away. Remember that you don’t have to see your retirement savings as a single pot of money. You might live until you’re 100 (how exhausting!) so it’s not about cashing it all in as soon as possible and sticking it under a metaphorical mattress.
Recover scattered workplace pensions
Do you have multiple pots from old jobs sitting forgotten? It’s common for people in their 50s to have pensions scattered across various providers. Each pension might have different fees, investment options, or levels of performance, and some may even be lost entirely if you’ve changed addresses or forgotten account details.
Tracking these down is crucial to understanding your total retirement savings and whether they align with your financial goals. Services like the government’s Pension Tracing Service or some pension providers help locate and recover these accounts on your behalf.
Once you’ve identified all your pensions and got a better sense of exactly how much you’re sitting on, you might consider consolidating them into a single account. This can simplify management, reduce fees, and make it easier to see how your savings are performing. However, transferring pensions isn’t always straightforward and, in some cases, might not be the right move for you. Some older accounts or Defined Benefit (DB) pensions may come with valuable perks, such as guaranteed annuity rates, which could be lost if you transfer them. It’s crucial to seek advice before making changes to ensure you don’t inadvertently give up something valuable.
Consider a DIY pension for more control
If you want to take a more hands-on approach to saving for retirement, setting up a Self-Invested Personal Pension (SIPP), allows you to make additional contributions and control what your money is invested in.
Unlike traditional workplace pensions, a SIPP allows you to decide exactly where your money is invested, giving you the flexibility to tailor your portfolio to match your financial goals and risk appetite. You can choose from a wide range of investment options, including shares, funds, bonds, and even commercial property – depending on which SIPP provider you open an account with. This means you’re not restricted to the choices offered by your employer’s scheme, for example, and can adapt your investments over time to suit changing market conditions or personal circumstances.
And if this sounds baffling, there are simpler options where you can get the experts to do it all for you. Check out the so-called ‘robo advisers’, who will ask you a bunch of questions about how you’d like to invest and then match you with a pre-made portfolio designed to meet your specific needs.
Either way, most people can start accessing their pension savings from age 55, so if you’re looking to take a more active role in managing your retirement fund, a SIPP gives you the flexibility to do just that.
Start planning your will
Now that your 40s are in the rear-view mirror, writing or updating your will should be up there on your to-do list. A will ensures your assets are distributed according to your wishes and can save your loved ones unnecessary stress and confusion when you’re not around to steer the ship. It’s particularly important if you’ve experienced major life changes, such as buying property, getting married, divorced or having children and/or step-children. Without a will, your estate will be divided according to intestacy laws, which may not reflect your intentions.
Now is also a good time to start thinking about Inheritance Tax (IHT) planning. If your estate exceeds the IHT threshold, your loved ones could face a hefty bill of up to 40%. There are ways to reduce this, such as gifting up to £3,000 annually. Previously, pensions would fall outside of your estate for IHT purposes, but changes announced in the 2024 Autumn Statement have confirmed that pensions will fall under IHT liability from April 2027. So if your estate is complex or substantial, or you’re just not sure how best to split your worldly possessions without landing a loved one with a big bill, consult a financial adviser who can help you navigate these rules and create a plan.
If things are a bit more simple, investigate Free Wills Month this March. The basic idea is you can get a (simple) will for free from a participating solicitor, if you nominate a charity to get a bit when it’s time!
Do you want to semi-retire?
Retirement doesn’t have to be an all-or-nothing decision. Many people in their 50s are choosing to transition into retirement gradually by reducing their working hours and semi-retiring. From age 55, you can access your pension pot for the first time, which can provide a helpful income boost if you decide to cut back on work.
However, tapping into your pension early requires careful planning. You’ll need to ensure your savings can support you both now and when you fully retire. Taking too much too soon could leave you falling short in later years. As a very rough rule of thumb, the ‘4% drawdown’ rule says that you can take 4% of your pension savings every year and not run out of savings for 30 years.
You have to tweak it a bit for things like inflation, but it’s a helpful estimate. It basically means you could have £100,000 in a managed pension pot, take £4,000 out every year, and it would last you 30 years.
Don’t fall into despair if this sounds bleak – remember to add your State Pension number to this, plus any pensions through work and other savings and investments as mentioned above.
2. Things to think about before semi-retirement
Take some or all of your tax-free lump sum
From the age of 55, you can withdraw up to 25% of your pension pot tax-free, which can provide a helpful cash boost if you’re going down the semi-retirement route. However, it’s crucial to think long-term, as whatever you withdraw will add to your taxable income and could increase your Income Tax liability (potentially shoving you up into a higher band).
If you’d rather not take all of your tax-free lump sum upfront, you can opt to take a smaller portion and leave the rest invested. By withdrawing a smaller amount initially, you retain the ability to take more tax-free sums later (up to your 25% total allowance). This strategy allows your pension pot to continue growing over time and helps you avoid spending too much early on.
As with most pension matters, if you’re not sure which strategy works best for you, it’s wise to check in with a qualified adviser who can review the state of your finances and guide you towards the best choices for your unique circumstances. Many advisers will only take on those with at least £100,000 in assets as a client. If this isn’t you, the Government-backed Money and Pension Service is a helpful place to start.
3. Adapt your saving strategy
Focus on income, rather than growth
As you move closer to retirement, your focus may shift from growing your wealth to generating a steady income. Investing for income, such as through dividend-paying shares and funds, can be a good way of funneling some extra cash into your pocket. Although these investments may not see the same long-term growth as other types of shares – such as high-octane, growth-focused tech stocks – they can provide a regular income stream which you can rely on even when the markets get rocky. For example, if you invested in an established Investment Trust which offers a dividend yield of 5%, you would receive £5 in cash every year for every £100 you invested in the fund.
Get serious about Inheritance Tax
Inheritance Tax (IHT) is something many of us would rather not think about (it’s very ageing!), but it’s important to plan ahead to avoid leaving your family with a hefty tax bill. Without proper planning, your estate could be taxed at 40% – significantly reducing the amount your loved ones would be left with.
To help mitigate this, it’s worth reviewing your finances and considering options to reduce your IHT liability. This is even more relevant now that the rules around inheriting pensions are due to change in 2027, when pension pots will begin to be counted towards the value of an estate for IHT purposes for the first time.
Fortunately, there are some options, such as using your annual gifting allowance to give away possessions up to a total value of £3,000 per year. The rules around IHT are notoriously complex, so if you’re unsure how to proceed, professional advice can help you navigate the complexities and devise a personalised plan that works for you and your family.
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