When Should You Retire and Start Your Pension?

It’s never an easy decision. The Daily Mail looks at some of the things to consider when you’re deciding when to retire.

The Retirement Age and You

  1. The Five-Year Journey: People tend to start thinking seriously about retirement when they hit their mid-60s. Typically, they begin using their personal savings at around 62 and fully retire at about 64.
  2. The Pension Gap: As folks retire before the official state pension age (66 or 67), they must bridge the gap using private savings. It’s like having a party at 7 PM but arriving at 6 PM — you need a way to spend that hour, or in this case, cover your expenses.
  1. Using Pension Savings While Working: Interestingly, 40% of individuals start using their pension savings while still in employment. It’s like dipping into your cookie jar before dinner. But remember, if you go beyond the tax-free 25% of your pension, you’re restricted in how much you can save and still get tax benefits.
  2. Tax on Pension: Anything you take from your pension beyond the tax-free lump sum is taxed as income. Big withdrawals can bump you into a higher tax bracket, meaning you’d pay more in taxes. It’s akin to paying more for an extra-large soda when you only wanted a medium.
  3. How People Use Their Pensions: Some over-55s use their pension money for holidays (21%), home improvements (21%), or buying new cars (14%). Others put it in bank or savings accounts (60% combined), which experts caution against since this money can lose value over time due to low interest rates and inflation.

Some Points to Ponder Before Retiring

  1. Why Now? Before tapping into your pension, ask yourself if you genuinely need to use that money right now.
  2. Retirement is Personal: Deciding to retire isn’t just a financial decision. It’s influenced by family, health, and your feelings about work. More people are now transitioning slowly into retirement, perhaps working part-time before they fully retire.
  3. Understanding Pensions: With the decline in company pensions and changes in state pension age, it’s crucial to be informed about your personal and state pensions. Think of it as knowing both the ingredients and the recipe when baking a cake.

Tips for Financially Preparing for Retirement

  1. Budget and Debts: Forecast your future expenses. Be realistic, and prioritize clearing high-interest debts.
  2. Know Your Income: Determine the income you’ll get from the state pension and any personal/company pensions. It’s like mapping out a road trip — know your starting point and destination.
  3. Longevity and Finances: With people living longer, ensure your pension will last your entire retirement. If you start eating a cake slice every day, ensure there’s enough cake to last the week.
  4. Choose the Right Retirement Products: Mix different products to match your needs. Just like picking a balanced diet, your financial portfolio needs variety for health.
  5. Mind the Tax: Keep track of the taxes you might owe when you withdraw from your pension. Think of it as avoiding overeating; you don’t want a tax bellyache.
  6. Beware of Scams: Keep an eye out for suspicious offers or unsolicited contacts. In the world of fishing, these are the dodgy baits. Don’t bite!


Retirement is a significant milestone that requires careful financial planning. Whether you’re considering working longer, increasing your savings, or just want to ensure you can enjoy your golden years, remember that information and planning are your best allies. It’s all about making sure that when you decide to take a break, you’ve got a comfortable deck chair and a cool drink waiting for you!