Why it’s so important to review your pensions as you approach retirement

If you're approaching retirement, you're about to enter a significant new phase of life. One that will likely require a shift in mindset as you ready yourself to enjoy your retirement years, cover later life expenses, and factor in inheritance plans 

With so much change, it’s crucial that you make sure your savings are ready for what lies ahead, and suits your specific needs. 

This is especially true if it’s been some time since you reviewed your pensions. What may have been appropriate for you in your 30s or 40s may no longer align with your current goals. 

Fortunately, there could be many options available to you with your pensions, which means there are routes to help keep your retirement on track. Of course, the retirement benefits you receive from your pension plan depend on a number of factors including the value of your plan when you decide to take your benefits which isn't guaranteed and can do down as well as up. 

The benefits of your plan could fall below the amount(s) paid in. But this is why reviewing your pensions, and exploring the options available to you is especially important as you approach retirement. 

Modern defined contribution (DC) pensions can present a range of options, including: 

• Taking tax-free cash
• Drawing an income through flexi-access drawdown
• Purchasing an annuity
• A combination of methods to suit your needs

With so many options available, it’s crucial to take stock of your pensions before making any concrete decisions. It’s important to align your choices with your circumstances and goals.

This is especially important considering how many older workplace pensions are “lifestyled” as retirement approaches. When we near retirement, pension providers often assume that savers will prefer greater certainty and lower levels of investment risk. 

As such, savings within these pensions can be automatically moved into lower-risk investments. While this may be suitable for some retirees, this may not be right for your specific preferences. 

There is a lot going on in the pension world. Reforms are on their way which are set to have a big impact on retirement planning, and serve as a reminder of the need to review where we stand. 

First and foremost is the inheritance tax (IHT) reforms which are due to be introduced from April 2027. Under the changes, most unused pension funds and death benefits will be included in a person’s estate for IHT purposes. This could influence how you choose to use your pension savings and structure your estate plans. 

The Government is also setting out proposals for the automatic consolidation of smaller DC pension pots. Meanwhile, the normal minimum pension age is set to rise from 55 to 57 in 2028, and the future of the triple lock continues to be discussed and debated. 

All this will likely shift how, why, and when we engage with our pensions and retirement plans. 

As you approach retirement, there are some questions you could ask yourself to help identify what actions may be needed: 

• Do I know how many pensions I have, or where they are?
• How can I track down any lost pensions? 
• What are my pension’s values?
• How are my pensions currently invested?
• Do I need to access them soon and if so, how will I do so?
• Do I have other sources of income?

Fortunately, we could help with these questions. Our advisers can help you feel in control of your future, and plan for a comfortable retirement. 

We can explore your current situation, and create a tailored retirement plan that matches your future goals. We can also get ahead of potential milestones that tend to emerge post-retirement, such as funding care costs, or inheritance concerns. 

The use of cash flow modelling can help us plan for all this. By forecasting your future income, expenditure and assets, cash flow modelling can help you understand whether you're on track to achieve your financial goals. 

For retirement planning specifically, it can help you assess issues such as: 

• When you can afford to retire
• The lifestyle you can achieve in retirement
• How long your money will last
• The impact long-term care costs could have on your finances
• Stress testing “what if” scenarios such as market downturns

If you'd like help better understanding your pension position and how it could influence your retirement plans, we're here to help. At Lloyds Wealth, we believe in clear, confident conversations that help you feel in control of your financial future.

Whatever stage you're at in your retirement journey, our advisers can help. From reviewing existing pensions and assessing your income options, to ensuring you're on track for the future, we'll help you make informed decisions and build a plan that's right for you.

This article is for information purposes only. It is not intended as investment advice.

Fees, charges and eligibility criteria apply.

Tax treatment depends on the individual circumstances of each client and may be subject to change in the future.

In preparing this article we have used third party sources which we believe to be true and accurate as at the date of writing but can give no assurances or warranty regarding the accuracy, currency or applicability of any of the contents in relation to specific situations and particular circumstances.

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