The Pensions and Lifetime Savings Association recently raised its benchmark for a ‘comfortable’ retirement to £43,900 a year for individuals and £60,600 for couples.
While these modest increases from last year’s figures might seem insignificant, they highlight an uncomfortable truth: the goalposts for a secure retirement keep moving.
A retirement plan created five years ago might already be outdated. Tax rules change, inflation erodes purchasing power, and your priorities shift as your life unfolds.
Long gone are the days of creating a pension plan in your thirties and forgetting about it until you retire. Regular reviews are essential for managing your retirement strategy.
But how often should you have them? It depends on your circumstances, age and how close you are to retirement.
Too frequent, and you risk making emotional decisions based on short-term market movements. Too sporadic, and you might miss opportunities or fail to address emerging risks.
This article explores how often you should review your retirement plan, what to examine during these reviews, and how to keep your strategy aligned with your evolving goals and circumstances.
Why regular reviews matter
The cost of complacency in retirement planning can be substantial. Small inefficiencies can compound over decades, potentially costing tens of thousands of pounds in lost growth or unnecessary tax. A portfolio that drifts just 1% annually from its target allocation might seem trivial, but over 20 years, it could significantly impact your retirement income.
Tax legislation changes frequently, from frozen allowances to the pension age increasing. Each adjustment can affect your long-term plans. Market volatility and interest rate cycles create both risks and opportunities that require your attention.
Your personal factors will evolve, too. Your vision of retirement at 35 might differ vastly from your perspective at 55. Your health may decline. Your family circumstances may change. You might have different dreams about your lifestyle in retirement than you did 20 years ago.
So, you shouldn’t just be asking yourself, ‘do I have enough?’. Instead, you should consider whether your financial plan supports the life you want to live when you retire. This shift requires a more sophisticated approach to reviewing your retirement strategy, examining not just the numbers, but also how it aligns with your goals and values.
Reviewing your retirement plan every year
Annual reviews are the backbone of effective retirement planning. The tax year-end provides a natural review point. However, while the rush to use all your allowances before the 5 April deadline creates urgency, planning throughout the year is more effective.
Your pension statements will arrive at different times throughout the year. When they do, check them for any changes in fees, how well your funds are doing and updates to your projected retirement income.
Getting the most from your ISA isn’t just about putting in the tax-free allowance of £20,000. Think about how much goes into cash ISAs versus stocks and shares ISAs. Check if moving old ISAs to new providers could get you better rates or lower fees. These small improvements add up over the years.
You don’t always need professional help for annual reviews. But it’s worth considering if you have several pensions, pay higher-rate tax or are close to your pension limits.
If you’re going it alone, which we don’t recommend, create a simple checklist so you don’t forget anything important. Include:
- How your investments performed
- What fees you’re paying
- How much you’re contributing
- Whether you’re being tax-efficient
- Whether you’re on track for retirement
Also, keep notes about what you review and what you decide. Write down why you made certain choices. You’ll be glad you did when you can’t remember years later.
Even if you do carry out your annual review on your own, it’s still worth meeting with your financial adviser periodically, to get an expert, impartial view and keep things on track. Again, the notes and information you keep will help you give your adviser a clearer picture of your financial circumstances, and where they can tweak things to make your plan more effective.
When to book a financial review
Some life events mean you should review your pension straight away.
Getting married means combining two sets of retirement plans and doubling some tax allowances. Divorce often means halving your retirement savings while your living costs stay similar.
Having children or grandchildren changes things. You might save less for retirement while paying for their education. Or, you might want a bigger retirement income to help support them in later life.
If you inherit money, you could boost your pension, but you’ll need to plan carefully to avoid unnecessary tax.
Illness or disability can change everything. You might need to retire early, check your insurance policies and plan for higher healthcare costs.
If you’re made redundant or offered early retirement, don’t just look at the lump sum. Think about how you’ll replace your income long-term.
When you pay off your mortgage, you free up money which you could put towards your pension. The same happens when your children become financially independent.
Reviewing your retirement plan at different life stages
Once a year is usually enough to review your retirement plan in your 30s and 40s. You’ve got time to recover from market drops, so you can take more investment risk. Keep an eye on any changes to the pension rules and update who gets it if you die.
In your 50s, you should review your plan twice a year. You’ll need to start thinking less about growing your pot and more about how you’ll create an income. Don’t get too cautious. You might live 30+ years in retirement and still need your pot to grow. You can access your pension at 55 (rising to 57 in 2028). It’s rarely wise to take it straight away, but it’s good to know your options.
At five years before retirement, you should review your plan every few months. Get specific about your income needs and tax planning. Think about retiring gradually rather than stopping work altogether.
In early retirement, check your pensions and investments quarterly while you work out a sustainable amount to withdraw to support your lifestyle. Once settled, you can review less frequently, and instead switch your focus towards making your money last and estate planning.
What to check in your reviews
Start by examining your investments. Check how well they’re performing compared to similar funds. If your UK fund is doing worse than other UK funds, find out why. Look carefully at the fees you’re paying, as even slight differences can cost thousands over time. Consider whether your risk level still matches your situation. And make sure your money is spread across different types of investments to protect against losses.
Next, review your overall retirement plan. Check whether you can still retire when you originally planned, or if market changes mean you need to adjust your target date.
Your income needs in retirement may have changed since your last review. Perhaps you now want to travel more. Or maybe you’ve paid off debts and need less.
Look for ways to be more tax-efficient with your savings. And don’t forget to check whether your insurance policies still provide the right protection.
Finally, consider the bigger picture affecting your retirement. Inflation might be reducing what your savings can buy. So, ensure your investments can keep pace.
Pension rules change regularly, and new legislation could affect your planning. Think about whether you’ll need to support elderly parents financially or want to leave money to family members.
If you haven’t already, plan for potential care costs in later life. These can be substantial and aren’t always covered by the NHS.
How can Glenrose help?
How often you review your retirement plan depends on your situation, but everyone needs regular reviews. Start with an annual check, and add more when life changes happen or as retirement approaches.
The recent increase in the cost of living shows that doing nothing now could mean falling behind in retirement. Good savings habits and reviewing your retirement plan regularly will prevent problems later on and help you maximise your retirement income.
At Glenrose, we specialise in comprehensive retirement planning that addresses all aspects of your financial future. Our experienced advisers work with you to assess your current position, identify areas for improvement and ensure your retirement plan stays on track.
Book a consultation today to learn how we can help you achieve the retirement you’ve worked hard for.