Plan your retirement: Navigating Your Financial Future

Imagine a retirement where you have the freedom to pursue your passions, explore the world or simply enjoy life’s simple pleasures without financial worries. This is not just a dream, it is entirely achievable with the right planning.  Taking control of your retirement early is one of the greatest gifts you can give your future self.

A well structured plan tailored to your goals and circumstances secures your finances and enhances your overall well-being. We find that clients who plan for retirement experience lower stress levels and greater peace of mind, allowing them to approach their later years with confidence.

This guide will walk you through the essential steps of retirement planning, from setting realistic goals and understanding pension options to maximising savings and overcoming potential challenges. Whether you are just starting out, mid career or approaching retirement age, you will find valuable insights and actionable advice to help you create a future on your terms.

FOOD FOR THOUGHT: Your retirement is shaped by the choices you make today, so start planning for the life you truly want, one smart decision at a time.

How your life stage relates to retirement: In your 50s or 60s

By now, retirement will be in your sights. You may have a firmer idea of how things might pan out. You might now be in a position where you can tweak things in your pension and investment planning to make sure you are in a position where you have options.  It’s never too late to start planning, after all there is a £1,073,000 lifetime limit on pensions. If you haven’t yet received financial advice then talking to a pension specialist will help to identify what assets you have and how they can be leveraged in your retirement planning. You will also need to find a way to ensure you are tax efficient with your hard-earned money. This becomes complicated and seeking financial advice will put you in a better position than if you got no help at all.

Pensions are where most people start off when thinking about retirement. In fact, your assets, pensions, savings and investments will all play a role in your retirement planning. When it comes to pensions these complex products are designed to allow regular contributions to mount up over time to a final retirement fund. They then pay out (or this same pot can be used in other ways) over the course of your retirement. There are many types of pension, but some of the most common are:

Defined contribution (DC) pension schemes 

You, and potentially your employer, pay a defined amount of money into a pension pot. The amount the pension will provide in your retirement is changeable and will depend on factors such as the amount you pay in, the investment performance, and how you choose to use the pot after the age of 55.

Defined benefit (DB) pension

This pension contribution changes based on: your age, how long you’ve worked and the salary you’ve earned. Your employer will pay into this pension, and you can make additional contributions to the scheme as well. This will then pay out a defined amount when you retire. After you die, the pension may continue to pay out to a spouse, civil partner or dependent.

Personal Pension

A type of defined contribution pension scheme. You’ll need to choose a pension provider and arrange the contributions yourself. This offers you ultimate responsibility, but it’s a wise idea to be in the know about the ins and outs of pensions and how they can affect your retirement plans. Often people have workplace pensions and their own personal pension.

Stakeholder pension

Another type of defined contribution pension. They are designed for low minimum contributions and flexibility across their payment lifetime. The charges will typically remain low and there will be a default investment strategy. There might not be that much choice with a stakeholder pension, but they are often simpler to understand.

Self-invested personal pensions (SIPPs)

A SIPP allows you to ‘wrap together’ a whole range of investments. It’s similar to a personal pension, but with more flexibility in the type of investments you can hold. There is a set number of investment types that can be included, such as trusts, securities, deposit accounts, commercial property, and stocks and shares. By including investments in a SIPP you gain growth that is free from Income Tax and Capital Gains Tax, plus additional tax breaks. They can be a good top-up option for your retirement plan.

KEY THING TO REMEMBER: The value of pensions and the income they produce can fall as well as rise, this means you may get back less than you invested.

How your life stage affects retirement: Your 30s and 40s

For many, their 30s and 40s are the years when pension planning finally becomes a priority. As you approach 40, you might feel like you have left it too late, but the truth is, it is never too late to start. While starting earlier gives you a greater advantage, beginning now is still far better than waiting any longer. By this stage, you may already have some savings and assets, which can serve as a foundation for a structured retirement plan.

This phase of life often brings significant changes, such as building a career, buying a home, starting a family, inheriting wealth or managing increased financial responsibilities. While these milestones can present opportunities to grow your wealth, they can also bring higher expenses. The key is finding a balance between enjoying your income now and securing financial stability for the future.

TOP TIP: Taking proactive steps today will put you in a stronger position later, ensuring you can build a retirement plan that aligns with your lifestyle and long term goals.

It is never more crucial that you start to really build up your retirement funds. If you haven’t yet started saving for retirement you will have to find unique ways to increase your savings in line with the amount of money you will need to retire on.  A mixture of exciting long-term planning can also be combined with a portfolio of less volatile investments alongside your pension, such as bonds or fixed annuities.

How your life stage affects retirement: Your 20s

If you’ve just started employment it may seem counterintuitive to be thinking about retirement. We understand how you feel, after all, many of us at Unividual are in our 20s too. When you think about anything to do with managing your money in your 20s it sometimes can feel daunting and too adult like, something we can feel like we want to rebel from. After all, we have spent most of our lives in education and we want to get out and explore the world and not get serious. Plus we all have student loans to pay back, rent to pay, some want to save for a house and of course, we all want to enjoy our social lives too.

A word from Cherie-Anne, Unividual’s Marketing Director

“The last thing I thought about doing when getting my first job in recruitment was saving for retirement. I was earning £18,000 at the time and wanted a new car and to also save for a house. There is an old wives tale that if you take your age and half it, that is roughly how much you should put into your pension. My Dad, as a financial adviser, went through the reasons why and how saving early would benefit me. At the time all I could focus on was how that money could be spent on other things but I rolled with it and started saving 10% of my earnings. I quickly realised after the first few months that actually you could do both: save for retirement AND still have a social life. I am now in my 30s and have over £50,000 in my pension. My brother Lewis Baxter now advises me, we recently moved my pension and it has had really good growth even during Coronavirus.”

“If I hadn’t made those contributions for the last 10 years I wouldn’t have had any more or less fun, or more memories from my 20s. I lived just like my friends did. What it did do, on top of creating a pot of earnings, is give me flexibility. Due to my head start I was able to put a small pause on contributions whilst my partner and I saved to move house. This won’t be for long and I will be making up for this lost time over the coming months. Everyone looks back and thinks ‘I wish I saved earlier’….not me!  I am so glad my Dad encouraged me to start early because I have managed to slowly build a sizable pot.”

– Cherie-Anne Baxter, Chartered Marketing Director

A note from retirement planning expert, Simon Jones

“At the time Cherie-Anne was a 20 year old looking to make a total pension contribution of 10% of her earnings. Many people don’t realise that due to the benefit of tax relief from the government, if Cherie-Anne invested in a private pension, as a basic rate tax payer she would actually contribute 8% of her earnings to achieve a total contribution of 10%.  This would work through the pension provider who adds on the basic rate tax relief and then claim it back from HMRC. So, on 10% of a £18,000 salary, if Cherie-Anne contributes £120 per month (£1,440 per year or 8% of £18,000)  she will have £30 tax relief added at source. £150 per month is £1,800 a year and therefore 10% of a £18,000 salary.

Business owner retirement

Perhaps you own a business? A note of caution on treating a property or business as part of your retirement plan. If you see yourself selling a business and using those funds to retire, then exit planning is the order of the day. Start to prepare the business for sale and get an idea of how to make it as attractive as possible to potential buyers. Don’t make the same mistake as others, by using the sale of a property or business as the only “Plan A” of your retirement.

Don’t just rely on work-place pensions

It’s important not to look at the workplace pension you’ve had for the last few years and simply consider that the end of the matter. You need to look at the final pension amount to see if it’s going to be sufficient to support your aims in retirement. If you’ve moved around a little and had a few jobs, you might have multiple workplace pensions. We help clients amalgamate their separate pensions in cases like this, and the outcomes can be very effective in getting your retirement planning on track.

The magic of compound interest

People getting closer to their retirement will tell you how quickly the years go by. Saving becomes more difficult as you acquire other expenses and responsibilities. One of the reasons to start saving early is compound interest, which is actually quite exciting when you know the secret. We like to use the analogy of a snowball fight.

You are at the top of a mountain, you have just made a snowball. To start with it is quite small, the size of your hand. If you were to throw it towards someone it wouldn’t have a massive impact. So, instead you roll the snowball down the mountain and as it turns it picks up more snow. The bigger the snowball gets, the more snow it can pick up and the faster it grows in size. You keep rolling until you get the size of snowball you need to win your snowball fight!

This is how compound interest works. You start off with a small investment that earns interest, then the investment and the interest earnt, earns more interest. The younger you start saving, the longer your money has to grow. The interest on interest (AKA compound interest) can cause wealth to snowball in growth. When you near retirement your small savings pot, which didn’t feel much at the time, will have grown significantly.

Let’s look at a practical example. From the age of 20 to 30, someone saves £100 a month, £1,200 a year. This total amount of £12,000, with a standard annual growth of 5%, will amount to £80,811 by year 29. This nest egg alone would be worth £117,149 by the time that person reached 70. In comparison, someone starting to save from the age of 40 would have to contribute £200 a month, £2,400 a year, for 15 years, until the age of 55 to get a similar value of £118,700. Take a look at our compound interest calculator to plot a few figures of your own.

Naturally other factors affect the end value of any pension plan, but the above serves as an example. A lot of younger people think they aren’t rich enough to need financial advice but receiving professional financial advice early on also means you’ll be able to avoid losing valuable allowances and take advantage of tax breaks. Actually financial advice is not as expensive as what people think so getting into good money habits now can bring huge benefits throughout your life.

How can you work out your own retirement needs?

Planning for retirement means understanding how much money you will need to maintain the lifestyle you want. For many, this can feel overwhelming, especially when pensions, savings and investments seem complex.

Like Mr and Mrs Taylor, in the case study above, the key to retirement planning is understanding how much you will need and where that money will come from. Here are some good starting points:

• Define your retirement lifestyle – Do you plan to travel? Maintain your current standard of living? Reduce expenses?
• Estimate your essential costs – Consider housing, bills, food, healthcare and day to day spending.
• Factor in extras – Budget for leisure, travel, hobbies and unexpected expenses.
• Review your income sources – Pensions, savings, investments, property or any part time income.
• Get expert advice – A financial planner can help you create a tailored strategy, ensuring your money lasts as long as you need it to.

By taking the right steps today, you can create a secure and enjoyable future, just like Mr and Mrs Taylor.

Author: Cherie-Anne Baxter-Blyth

Written: 30th April 2024

Updated: 21st February 2025

Business Exit Planning is not regulated by the Financial Conduct Authority.

The information in this guide is only accurate up to the last day it was updated.

Will writing is not part of the Quilter Financial Planning offering and is offered in our own right. Quilter Financial Planning accept no responsibility for this aspect of our business.