While phasing into retirement can offer you greater flexibility, it may make your finances more complex. Read on to find out more about five key considerations.

1. Calculate if you’ll need to supplement your income

While you might still earn a salary as you phase into retirement, if you’ve chosen to reduce your working hours or switch roles, it might not be enough to maintain your lifestyle.

If this is the case, you may opt to supplement your salary with income from other sources. For example, you might start to take an income from your pension or deplete your cash savings.

A financial plan can help you assess what income you need and whether there’s a gap to close.

Remember, money taken from your pension will usually be added to your other income when calculating your Income Tax liability. As a result, it’s important to keep track of your different income sources so you don’t face an unexpected bill.

If you’re using assets to support your lifestyle as you phase into retirement, it’s also important to consider longevity and the effect of triggering the Money Purchase Annual Allowance (MPAA) if you access your pension. Both points are covered in greater detail below.

2. Decide if you’ll continue to contribute to your pension

Contributing to your pension as you phase into retirement could mean you’re able to afford a more comfortable lifestyle when you give up work. A financial planner can help you assess how your contributions will add up and whether contributing is advisable for you.

If you’ll be supplementing your income, you should be aware of the MPAA and how much you can add to your pension each tax year.

In 2025/26, the maximum amount that can be paid into your pension before paying an extra tax charge is £60,000. This is known as the Annual Allowance. However, if you withdraw a flexible income from your pension, you may trigger the MPAA, which would reduce the amount to £10,000.

According to a Wealthify survey (17.09.2025), just 3% of pension holders understood what “MPAA” meant. Yet, this little-known allowance could limit your future pension contributions and affect the income you receive later in life.

3. Determine when to claim your State Pension

The current State Pension age is 66, and it will rise gradually to 68 by 2046.

When you reach State Pension Age, you won’t automatically start receiving payments. You must claim it. This means, if you choose to, you can defer claiming your State Pension until you stop working completely.

The money you receive from the State Pension is added to your other sources of income when calculating Income Tax liability. Deferring your State Pension might reduce your overall tax bill as a result.

In addition, for every nine weeks you defer the State Pension, the income you’ll receive from it when you do claim it will rise by 1%.

4. Assess how your pension and other assets are invested

Your pension is typically invested, and you might have other investments that are earmarked for retirement. If your plans have changed to include a period of phasing into retirement, you may benefit from assessing how your money is invested.

Often, your pension will be moved to investments that are more stable as your retirement age approaches. If your money will now remain invested for longer, this may not be the most appropriate option for you.

5. Establish your long-term income needs

It can be difficult to understand how the value of your pension and other assets will change during your retirement, particularly if your income needs will shift.

Setting out your income needs at each phase of your retirement and using a cashflow model could help you visualise how your pension and other assets could change. This can help you see if your assets will provide you with security for the rest of your life or if there’s a shortfall.

A cashflow model will make certain assumptions, such as the average annual return of your pension or the rate of inflation. The outcomes aren’t guaranteed, but they can provide a useful insight into your long-term finances and the effect of your decisions.

A financial plan can identify retirement considerations that are important to you

Alongside these five considerations, you might have other important questions to weigh up when you’re retiring, including whether to phase into the next chapter of your life. A tailored financial plan can help you understand your finances now and how they might change as you gradually give up work and eventually stop completely.

Please get in touch if you’d like to talk to us about your retirement plan.

Please note: This blog is for general information only and does not constitute financial advice, which should be based on your individual circumstances. The information is aimed at retail clients only.

Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.

A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance.

The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts.

The Financial Conduct Authority does not regulate tax planning or cashflow modelling.

After months of speculation and rumour, chancellor Rachel Reeves has delivered the Autumn Budget for 2025. In this update, we’ll explain the key changes and what they mean for you. 

Last year, in her maiden Budget, the chancellor sought to balance the public finances with tax rises to cover a reported £22 billion black hole.

This year, Reeves arguably faced an even more difficult landscape. In turn, she has announced an estimated £26 billion of tax rises by 2029/30. 

The chancellor had to start her speech, however, by acknowledging the “deeply disappointing” and “serious error” of the Budget announcements being released early by the Office for Budget Responsibility (OBR). 

It’s also notable how many predictions ultimately proved to be wide of the mark.

Now that we know exactly what’s included, it’s important to understand the changes and how they could affect you.

The headlines regarding GDP, national debt, and inflation

The chancellor says the government’s plans will reduce borrowing more over the rest of this parliament than any country in the G7.

GDP is expected to grow by 1.5% in 2025, higher than the OBR’s 1% forecast from earlier this year. In subsequent years, the estimations are as follows:

• In 2026, the economy is forecast to grow by 1.4%, below the previous forecast of 1.9%.
• In 2027, GDP is forecast to expand by 1.6%, falling short of March’s estimate of 1.8%.
• In 2028, GDP is estimated to rise by 1.5%. In March of this year, the OBR said this figure would be 1.7%.
• In 2029, the economy will expand by 1.5%, again falling short of the previous estimate of 1.8%.

Due to weaker underlying productivity growth, the OBR estimates that tax receipts will be £16 billion lower in 2029/30 than initially forecast in March 2025.

Average inflation is expected to fall over the next three years.

• In 2025: 3.5%, an increase of 0.2% from the OBR’s original forecast.
• In 2026: 2.5%, up from the OBR’s 2.1% forecast from March.
• In 2027: 2%.

National debt will stand at £2.6 trillion this year. £1 in every £10 the government spends is on debt interest.

Tax threshold freezes extended until 2031

The Labour manifesto promised not to increase Income Tax or National Insurance (NI), and despite pre-Budget speculation, the government has kept to that promise in this Budget. 

However, the chancellor did announce that the Income Tax thresholds will remain frozen for a further three years beyond the previous 2028 freeze, staying where they are until April 2031. This move will raise £8 billion for the government. Similarly, the Inheritance Tax (IHT) threshold freeze is extended from 2030 to 2031. 

While this will not increase your Income Tax or IHT bills directly, this fiscal drag means more of your income and wealth may be exposed to tax over time. 

The government is also upholding its commitment to bringing pension pots into the scope of IHT from April 2027, and reforms to relief for business and agricultural assets from April 2026.

The tax rates on dividends, savings, and property income will rise by two percentage points 

Tax rates are set to rise for dividends, savings, and property income.

• Dividends: From April 2026, ordinary and upper rates of tax on dividend income will rise by two percentage points to 10.75% and 35.75% respectively. There is no change to the additional rate, which will remain at 39.35%.
• Property and savings: From April 2027, the rate of tax on property and savings income will increase by two percentage points across all tax bands to 22%, 42%, and 47% respectively.

The government confirmed that, even after these reforms, 90% of taxpayers will still pay no tax on their savings. However, these changes are set to impact business owners and landlords.

The chancellor says these increases will raise £2.2 billion in 2029/30.

The ISA allowance will be reformed for under-65s, and some allowances have been frozen

The chancellor announced that from April 2027, the Individual Savings Account (ISA) allowance will change for under-65s.

As it stands, adults can contribute £20,000 across their ISAs, including Cash ISAs and Stocks and Shares ISAs, each tax year. 

From April 2027, £8,000 of this allowance will be reserved exclusively for investments, leaving an available £12,000 that savers can pay into their non-investment accounts, such as Cash ISAs.

Savers over the age of 65 will continue to be able to save up to £20,000 in a Cash ISA each year. 

The allowances for Junior ISAs and Lifetime ISAs are frozen until April 2031 at £9,000 and £4,000 a year, respectively. 

Salary sacrifice on pension contributions to be capped at £2,000

The chancellor put a cap on NI-efficient pension contributions made under salary sacrifice.

Salary sacrifice schemes cost the government £2.8 billion in 2016/17, but this figure was set to triple to £8 billion by 2030/31.

The government will charge employer and employee National Insurance contributions (NICs) on pension contributions above £2,000 a year made via salary sacrifice. This will take effect from 6 April 2029.

The chancellor says that many of those on low and middle incomes will be able to continue using salary sacrifice as normal, while high earners can expect to pay increased NI.

New “mansion tax” on high-value properties

The chancellor announced the much-speculated “mansion tax” that will affect the top 1% of properties. 

The new property surcharge will be paid alongside Council Tax. 

There will be four price bands starting with £2,500 for a property valued between £2 million and £2.5 million. For properties valued more than £5 million, the levy will be £7,500. 

The measure is estimated to raise £400 million by 2031. 

Welfare reforms expected to increase by 2029/30

The BBC reported that changes to the government’s previously announced winter fuel payments and health-related benefits will cost £7 billion in 2029/30.

In addition, Reeves revealed she would remove the two-child benefit cap. This will cost £3 billion by 2029/30.

State Pension: Removal of overseas access to Class 2 National Insurance contributions and committing to the triple lock

As a result of a loophole in the Class 2 voluntary NICs regime, overseas individuals with a limited connection to the UK can build a State Pension entitlement through cheaper rates.

The government is looking to end this by removing access to the cheapest Class 2 NICs for these individuals. Additionally, it will increase the initial residency or contribution requirements for those living outside the UK.

The chancellor also confirmed the government’s commitment to the triple lock. From April 2026, this will increase the basic and new State Pension by 4.8%, offering up to an additional £575 per year to pensioners, depending on their entitlement.

A range of significant changes for business owners

In addition to the Dividend Tax increase, the chancellor announced a range of changes that could affect business owners, including:

• Increases to both the National Living Wage (NLW) and National Minimum Wage (NMW). From 1 April 2026, the NLW paid to workers aged 21 and over will rise by 4.1%, from £12.21 to £12.71 an hour, increasing annual income by approximately £900 a year for full-time employees. For those aged 18 to 20, the NMW will rise by 8.5% from £10 to £10.85 an hour, equivalent to around £1,500 a year if working full-time. For 16- and 17-year-olds, and those on apprenticeships, the NMW will rise by 6%, going from £7.55 to £8 an hour.
• Listing Relief from Stamp Duty Reserve Tax for some businesses. The chancellor said this will “make it easier for entrepreneurs to start, scale, and stay in the UK”.
• Reduced Capital Gains Tax (CGT) relief for Employee Ownership Trusts (EOTs). When a business is sold to an EOT, CGT relief will fall from 100% to 50% starting from November 2025. This will raise £0.9 billion from 2027/28 onwards.
• Fully funded apprenticeships for under-25s. This will make them effectively free for small- and medium-sized businesses (SMEs) from April 2026.
• Lower business rates for more than 750,000 retail, hospitality, and leisure properties. That move will be funded through higher rates on properties worth £500,000 or more, such as warehouses used by online retail.
• Customs duty will apply to parcels of any value from March 2029 at the latest. There is an existing exemption for parcels worth less than £135, favouring large-scale importers. 

Other announcements that may affect you

• Household energy bills will fall. Reeves is scrapping the Energy Company Obligation (ECO) scheme, saying that on average, families will save £150 a year in 2026.
• A new tax on electric vehicles. The Electric Vehicle Excise Duty (eVED) will come into effect in 2028 and equal 3p per mile for battery electric cars and 1.5p per mile for plug-in hybrids. The rate per mile will increase annually in line with the CPI. 
• Fuel duty will be frozen until September 2026. In addition, a new “fuel finder” will help drivers find the cheapest fuel, saving the average household £40 a year.
• Reducing the levy threshold on soft drinks. From 1 January 2028, the sugar tax will also be applied to milk-based drinks, including bottled milkshakes and lattes.
• A spousal exemption for agricultural and business asset IHT relief. Unused combined business and agricultural asset IHT relief will become transferable between spouses and civil partners.
• Tobacco Duty and Alcohol Duty will both be uprated. Tobacco Duty will be uprated as announced last year, and Alcohol Duty will now rise with inflation.
• Rising taxes on online gambling. From April 2026, Remote Gaming Duty will increase by 21% to 40%. A new Remote Betting Rate set at 25% will be introduced from April 2027, though horse race betting will be exempt from the changes. 

Other key thresholds that remain the same

More broadly, the chancellor made no mention of other key thresholds that will remain the same. These include:

• The pension Annual Allowance
• Stamp Duty Land Tax for residential properties
• The headline rates of Income Tax, NI, and VAT, as outlined in the government’s election manifesto.

Please note

All information is from the Budget documents on this page.

The content of this Autumn Budget summary is intended for general information purposes only. The content should not be relied upon in its entirety and shall not be deemed to be or constitute advice. 

While we believe this interpretation to be correct, it cannot be guaranteed, and we cannot accept any responsibility for any action taken or refrained from being taken as a result of the information contained within this summary. Please obtain professional advice before entering into or altering any new arrangement.  

In life, the finest wisdom often comes from the most unexpected places.

So, you may be surprised to learn that Jane Austen – one of the most revered romance authors of all time and a paragon of women’s literature – has anything to teach you about the modern world of finance.

Born in Hampshire in 1775, one of eight children, nobody expected the unassuming Jane to become a novelist – or that her works would endure for centuries, let alone that her face would end up on the £10 note.

But like Austen’s wonderful works of fiction, some financial concepts stand the test of time, remaining relevant no matter how trends change and markets move.

Read this guide to discover what you could learn from Mansfield Park, Pride and Prejudice, and other novels from the celebrated author.

Download your copy here: 5 enduring money lessons you can discover in Jane Austen’s novels

If you have any questions about the topics covered in this guide or your financial plan, please get in touch.

Please note: This guide is for general information only and does not constitute advice. The information is aimed at retail clients only.

With so many headlines about tourists taking over popular holiday spots and governments introducing restrictions, such as tourist taxes and bans on new hotels or souvenir shops, you might find it harder than ever to decide where to travel next.

Luckily, Europe is filled with amazing places you can visit to get the authentic experience of that country without fighting your way through crowds of tourists.

Read on to discover our top 10 hidden European gems for the perfect spring break.

1. Naxos, Greece

If you’ve always wanted to visit Santorini but don’t want your holiday interrupted by tourists queueing for the perfect picture, you might want to head to Naxos instead.

This beautiful island boasts ancient ruins and traditional white-washed buildings that draw people to Santorini without the huge crowds. Discover the island’s fascinating history by visiting the Temple of Apollo, or relax on the long stretches of sandy beaches.

2. Berat, Albania

Berat is often referred to as the “City of a Thousand Windows” because of the incredible stack of Ottoman houses on the side of Berat Hill.

Visit the Bogovë Nature Park and Lake Komani to experience the gorgeous natural landscape and secluded waterfall, or climb to the top of Berat Hill to explore the incredible 13th-century castle.

3. Valencia, Spain

This stunning port city sits on the same coastline as Barcelona, so you can enjoy the gorgeous beaches and incredible architecture without battling your way through a crowd.

Explore the rich history of Valencia through an interactive museum, explore one of the many walking trails through the beautiful landscape, or soak up the sun on the beach.

What’s more, research concluded that Valencia is the most affordable city in Europe for a pint of beer!

4. Kotor, Montenegro

If you were considering visiting Croatia, you might want to pop next door to Montenegro instead.

With the same picturesque Mediterranean coastline and sunny weather, Montenegro has the same rugged mountains and enchanting medieval villages while being less crowded than more popular destinations like Dubrovnik.

Visit the Venetian fortifications in Kotor for a taste of history or take a dip in the stunning Bay of Kotor if you’d prefer to relax.

5. Graz, Austria

If you’re looking for a sustainable city break, Graz is the place to go. Although it’s Austria’s second biggest city, it’s often overlooked.

Surrounded by the Styrian countryside, the city takes fresh produce, vegetarian dishes, and creative recipes to a new level that will deliver the best of Austrian cuisine.

6. Wroclaw, Poland

With the Czech Republic introducing increasing restrictions on tourists in Prague after they started taking over entire zones of the city, you can avoid the hordes and get a similar experience by visiting Wroclaw instead.

Explore the dazzling Gothic architecture and the picturesque Oder River in the daytime, and visit Speakeasy-type bars and fine-dining restaurants to make the most of the city’s electrifying nightlife.

7. Porto Santo, Portugal

Madeira is currently enjoying its moment in the spotlight, but a smaller island only a three-hour ferry ride away remains one of the best European beach escapes.

Porto Santo is more beach than island, with a nine-kilometre stretch of sand backed by rolling hills and lush greenery. Relax in the sun, or venture out into the wilderness along the island’s many hiking routes.

8. Ghent, Belgium

If you’re looking for the same fascinating architecture and local culture as Amsterdam without having to pay extra for tourist tax, why not head to Ghent in Belgium instead?

Filled with quirky bars and an amazing pedestrianised city centre for you to explore, Ghent boasts a medieval castle and Michelin-starred restaurants, so there’s something for everyone to enjoy.

9. The Frosinone Valley, Italy

Halfway between Rome and Naples, the Frosinone Valley is often no more than a stop for travellers. However, it hides the incredible Abbey of Montecassino and the Valle di Comino, where some of Europe’s deadliest battles have taken place.

But if you’d prefer to search for postcard-perfect views, Frosinone is also the place for you. Sip award-winning cabernet in the vineyards or head to San Donato Val di Comino for incredible mountain views.

10. León, Spain

There are so many popular cities in Spain. However, León is another that escapes most people’s notice.

Home to one of Gaudi’s designs, the architecture is the city’s main attraction. Casa Botines, one of his only works outside Catalonia, makes it the perfect place to visit if you want to experience history without the hustle and bustle of Barcelona or Madrid.

Using allowances and exemptions could reduce your overall tax bill and help you get more out of your money. On 5 April 2025, the current tax year will end, and many tax-efficient allowances and exemptions will reset. So, here are five that you may want to consider using before the 2025/26 tax year starts.

1. ISA allowance

ISAs provide a popular way to tax-efficiently save and invest. Indeed, the latest government figures show in 2022/23, 12.4 million ISAs were subscribed to with around £71.6 billion being collectively added to accounts.

For the 2024/25 tax year, you can add up to £20,000 to ISAs. If you hold money in a Cash ISA, the interest you receive wouldn’t be liable for Income Tax. Similarly, if you invest through a Stocks and Shares ISA, any returns generated aren’t liable for Capital Gains Tax (CGT).

If you don’t use your ISA allowance before the tax year ends, you’ll lose it. So, it could be worthwhile reviewing your saving and investing goals now.

Before you place money into an ISA, it’s often a good idea to consider your goal. For short-term goals, a Cash ISA might be suitable for your needs. On the other hand, if you’re putting money away for a goal that’s more than five years away, you may want to consider if you could benefit from investing.

In addition, if you’re aged between 18 and 39, you could open a Lifetime ISA (LISA). In the 2024/25 tax year, you can add up to £4,000 to a LISA and receive a 25% government bonus. The £4,000 LISA allowance counts towards your overall £20,000 ISA allowance.

However, if you withdraw money from a LISA before the age of 60 for a purpose other than buying your first home, you’d pay a 25% penalty. As a result, a LISA is often most suitable for those saving to get on the property ladder.

2. Dividend Allowance

If you’re a business owner or hold shares in some companies, you might receive dividends.

You don’t pay tax on dividends that fall within your Personal Allowance, which is £12,570 in 2024/25. In addition, you can receive up to £500 in dividends before Dividend Tax is due under your Dividend Allowance. So, dividends could offer a valuable way to boost your income without increasing your tax liability.

You cannot carry forward unused Dividend Allowance.

Even if your dividends could exceed the allowance, the tax rate you pay could be lower than receiving a comparable amount that was liable for Income Tax. The rate of Dividend Tax you pay depends on your Income Tax band. In 2024/25, the rates are:

• Basic rate: 8.75%
• Higher rate: 33.75%
• Additional rate: 39.35%

So, making dividends part of your financial plan could reduce your overall tax bill even if you’re liable for Dividend Tax.

3. Capital Gains Tax Annual Exempt Amount

Chancellor Rachel Reeves made several changes to CGT in the Autumn Budget, including increasing the main rates. Consequently, you could find your tax liability is higher than expected when you make a profit when you dispose of some assets.

Indeed, the Office for Budget Responsibility estimates CGT could raise £15.2 billion in 2024/25, which may then increase to £23.5 billion in 2028/29.

From 30 October 2024, the standard rates of CGT are:

• 24% if you’re a higher- or additional-rate taxpayer
• 18% if you’re a basic-rate taxpayer and the gains fall within the basic-rate Income Tax band.

Importantly, the Annual Exempt Amount means you can make profits of up to £3,000 in 2024/25 before CGT is due. So, if you plan to dispose of assets, timing the decision to make use of this exemption could be valuable.

You cannot carry forward the Annual Exempt Amount into the new tax year if you don’t use it.

4. Pension Annual Allowance

Pensions provide a tax-efficient way to save for your retirement as contributions benefit from tax relief and the interest or investment returns generated are tax-free.

In 2024/25, the Pension Annual Allowance is £60,000 – this is the amount you can tax-efficiently add to your pension in a single tax year, so you might also need to consider employer contributions and those made by other third parties. However, you can only claim tax relief on up to 100% of your annual earnings, or £2,880 if you’re a non-taxpayer.

There are two reasons why your Annual Allowance may be lower.

• If your adjusted income is more than £260,000 and your threshold income is more than £200,000, the allowance will taper. For every £2 your income exceeds the adjusted income threshold, your Annual Allowance will fall by £1. The tapering stops at £360,000, so everyone retains an allowance of £10,000.
• If you’ve already flexibly accessed your pension, the Money Purchase Annual Allowance may affect you. This reduces the amount you can tax-efficiently add to your pension to £10,000.

You can carry your Annual Allowance forward for up to three tax years. So, you have until 5 April 2025 to use any unused allowance from 2021/22.

5. Inheritance Tax annual exemption

Government figures suggest Inheritance Tax (IHT) bills are on the rise. Indeed, IHT tax receipts between April 2024 and October 2024 were £5 billion – around £500 million higher than the same period last year.

If your estate could be liable for IHT when you die, passing on wealth during your lifetime could be a valuable way to reduce a potential bill.

However, not all gifts are considered immediately outside of your estate for IHT purposes. Some may be included in your estate for up to seven years, which are known as “potentially exempt transfers”.

So, using allowances and exemptions that enable you to pass gifts to your loved ones without worrying about IHT might be an important part of your estate plan.

In 2024/25, the annual exemption means you can pass on £3,000 without worrying about IHT. You can carry forward your annual gifting exemption from the previous tax year, so you could gift up to £6,000 in a single tax year and have it fall immediately outside your estate.

There are often other allowances or ways you could reduce your estate’s potential IHT bill. Please contact us to talk about steps you may take. 

Get in touch to discuss your end-of-year tax plan

If you’d like to talk about which allowances and exemptions you may want to use to reduce your tax bill in 2024/25, please get in touch. We’ll work with you to help you understand which steps could be right for your circumstances and aspirations.

Please note: This blog is for general information only and does not constitute financial advice, which should be based on your individual circumstances. The information is aimed at retail clients only.

Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.

The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.

A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance.

The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts. 

The Financial Conduct Authority does not regulate tax planning, Inheritance Tax planning, or estate planning.

Retirement is an exciting milestone, with more free time to dedicate to the things you enjoy. Yet, it can also be a daunting time, especially when it comes to managing your finances.

Flexi-access drawdown is a popular way to access your pension savings as it provides flexibility and means you’re in control of your income. However, it also means you’re responsible for ensuring you don’t run out of money.

With the pressure of managing pension withdrawals, it’s perhaps unsurprising that a study in IFA Magazine found that almost half of retirees are worried about spending too much too soon.

Indeed, statistics from the Financial Conduct Authority indicate some retirees could be withdrawing money from their pension at an unsustainable rate.

For example, more than 30% of people accessing a pension with a value between £100,000 and £249,000 in 2023/24, withdrew at least 8% of their pension. Some of these people may have other pensions or assets they could use to fund retirement, but others could find they face a shortfall in the future because they’re accessing their pension at an unsustainable rate.

One of the challenges of managing pension withdrawals is that some factors are outside of your control.

The known unknowns of retirement

When you’re planning your retirement income, you’re likely to need to consider known unknown factors – you know they will affect your retirement plan in some way, but accurately predicting exactly how they’ll affect you at the start of retirement isn’t possible. 

The list of known unknowns might be lengthy and some won’t affect all retirees. However, there are three key variables that most retirees could benefit from considering when calculating their sustainable pension withdrawal rate.

1. Life expectancy

If you knew how long your pension needed to provide an income, you could simply break it down into even blocks and rest assured that you wouldn’t run out.

In reality, you don’t know how long your pension needs to last. The average life expectancy could provide a useful indicator, but it’s far from certain.

According to the Office for National Statistics, a 65-year-old man has an average life expectancy of 85. However, he also has a 1 in 4 chance of reaching 92 and around 1 in 10 will celebrate their 96th birthday. For a 65-year-old woman, the average life expectancy is 87, with a 1 in 4 chance of reaching 94 and around 10% will celebrate their 98th birthday.

So, if you based pension withdrawals on the average life expectancy, there’s a chance that you could outlive your pension by a decade or more.

As a result, erring on the side of caution when calculating how long you’ll spend in retirement could be useful. A retirement plan could help you balance long-term financial security with enjoying your early years of retirement.

2. Inflation

The income you’ll need to maintain your lifestyle during retirement is unlikely to be static. Instead, inflation will usually mean your income will need to increase each year.

The Bank of England (BoE) has an annual inflation target of 2%. While this might seem like it’ll have little effect on your income needs, over decades it could add up. In addition, the recent period of high inflation has highlighted that the cost of goods and services can rise at a faster pace.

According to the BoE, if you retired in 2018 with an annual income of £40,000, just five years later your income will need to have increased to almost £50,000 just to provide you with the same spending power.

Failing to consider the effect inflation might have on your needs and wealth could derail your plans.

Indeed, an IFA Magazine report suggests the number of retirees searching for a job increased by 16% in 2024 when compared to a year earlier due to rising living costs.

3. Investment performance

One of the potential benefits of choosing flexi-access drawdown is that your pension will usually remain invested. This provides an opportunity for your pension to generate investment returns.

However, it’s not always straightforward. The performance of your investments could have a direct effect on the sustainable withdrawal rate.

For instance, during a downturn, you’d need to sell a greater proportion of your pension investments to achieve the same income. This could mean you deplete your pension quicker than expected and leave a potential shortfall in the future.

When weighing up the effect of investment performance, you might need to consider questions like:

• What are my expected investment returns?
• What is an appropriate level of risk for me in retirement?
• How should I manage pension withdrawals if the value of my pension falls?

Regular reviews could help you assess investment performance and make adjustments to your retirement income when appropriate. 

Other unexpected factors could affect your retirement finances too

It’s not just these three known unknowns of retirement that could affect your finances, either. Other variables outside of your control might affect your income needs too, from emergency repairs to your home to care costs later in life.

When creating a retirement plan, adding a buffer and carrying out regular reviews could help you manage your finances and feel confident about the future.

Get in touch to talk about creating a sustainable retirement income

Contact us to talk about your retirement plans and how you might manage financial variables, including known unknowns. A retirement plan could give you confidence in your finances and mean you can focus on enjoying the next chapter of your life.

Please note: This blog is for general information only and does not constitute financial advice, which should be based on your individual circumstances. The information is aimed at retail clients only.

A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance.

The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts.