Retiring abroad is a dream for many people and one which becomes all the more alluring if you return from a fortnight in the sun to the questionable delights of the UK weather.
But how do you make that dream a reality?
Here we take a look at some of the important practical and financial steps you need to consider before retiring abroad – and how taking expert advice can help you make the move.
If you’re already thinking about retiring abroad, the chances are you may have decided on your destination.
This choice may be based on previous knowledge of the country and the location – maybe it’s the place where you holiday every year – but you’ll need to consider other factors if you’re making your move permanent.
Think about questions such as:
Legal requirements and residency rules also need to be carefully assessed – do you have the right to live permanently in that country? Will you need to change your citizenship status or fulfil other obligations?
For example, following Brexit, current rules mean that UK residents living in EU countries need to apply for a new residence status to secure their rights. Each EU country also has its own specific immigration laws and visa requirements so you will need to consult the embassy or consulate of their host country for details on how to apply for a residence permit.
Another key consideration is whether you plan to retain a property in the UK or sell up completely.
Some retirees choose to keep a property they can return to if things don’t work out as planned or to rent out as a way of securing additional income to fund their new life in the sun.
You may also want to retain your UK property with the aim of passing it on to your descendants so they can live there or can realise the value of selling it after your death.
All of these choices have different financial, tax and pensions ramifications so whichever route you choose, it is prudent to seek expert advice at an early stage from an independent adviser to discover where you and your family stand.
If you’ve decided on your destination and worked out what you want to do with your current home, figuring out the finances needed for retiring abroad is a crucial step. You’ll need to consider things like currency exchange rates and cost of living changes when you’re working out your money.
If you are retiring abroad and have no intention of working again then you will probably be relying on your pension to pay the bulk of your living expenses.
You will need to choose whether to transfer your UK pension abroad or just leave it in the UK. If you decide to leave your pension savings invested in the UK, your pension provider can either pay pension income into your UK bank account or pay it into a bank account in your new country.
Neither choice is straightforward. If you move abroad, you might not be able to keep your UK bank account. If you opt for an account in your new country, not all pension providers will send money to a non-UK bank account and those that do might charge you for it. With this in mind, it is important to talk through your options with your pension provider and bank.
If you’re considering moving your UK pension abroad, a Qualifying Recognised Overseas Pension Scheme (QROPS) might be an option. QROPS allow you to transfer your pension to certain overseas schemes, potentially offering more flexibility and tax advantages. However, transfers can be complex and may incur charges, so it’s important to get professional advice before deciding what to do.
As well as any personal pensions you have, you will also generally be entitled to a State pension if you are a UK resident who has been paying National Insurance contributions for 10 years or more.
However, you will not receive your State pension until you are 66 (increasing to 67 between 2026 and 2028 with future increases to 68 planned). This could have a major impact on when you decide to move abroad.
In addition to when you receive your State pension, another important factor to consider is how much that pension will be.
While UK residents automatically receive annual increases in their State pension, those who live abroad may not do so.
Your State pension if you retire abroad will only currently increase each year if you live in countries in the European Economic Area, Gibraltar, Switzerland and 15 other countries which have reciprocal agreements with the UK. Live anywhere else – including in places such as Australia and Canada – and your pension will currently be frozen at the rate you first move abroad.
The All-Party Parliamentary Group on frozen British pensions estimates that approximately 450,000 British pensioners living abroad are currently on frozen pensions, meaning their real terms income is declining every year.
With considerations like this, it is easy to see why taking expert advice on retirement planning is crucial before deciding on your big move.
Keeping fit and healthy can be a challenge, particularly in your later years, so it is prudent to consider what healthcare arrangements are available in your new country.
Healthcare systems vary from country to country and might not include services you’d expect to get free on the NHS. You may have to pay a patient contribution towards any treatment, or you may need to take out health insurance.
With all this in mind, you should take time to research healthcare access, healthcare entitlements and likely healthcare costs in your prospective new country and factor those into your financial calculations.
It’s not something you want to think about when planning an exciting new life abroad, but what would happen if you or your partner suffered a serious illness or died overseas? How would your income be affected, would you have to return home for good and how would such an occurrence impact on your family?
This is why talking to an adviser about financial protection is really important before embarking on that big move overseas. Your adviser will be able to explain the different protection policies available and how they work when it comes to policy holders who live abroad.
Sadly, tax issues don’t go away when you move overseas!
Being an expat can bring some tax advantages but it does mean taking extra care and still paying the UK tax you owe.
The amount you have to pay will depend on many different factors, including:
Living abroad can also affect how much capital gains tax you may need to pay on certain assets and this can differ by country or region. You may need to obtain specialist tax advice when considering your options.
Moving overseas also involves dealing with legal issues. Aside from visa and citizenship matters mentioned earlier, living abroad can affect how your estate is treated when it comes to inheritance.
As can be seen, retiring abroad involves a lot more preparation than packing for a fortnight’s holiday.
There are important financial, legal, tax, pensions and practical matters which require careful thought and considered actions.
However, by taking expert advice at an early stage, you can put a plan in place that will enable you to sail off into the sunset with confidence.
Disclaimer: This article is for informational purposes only and does not constitute financial, tax, or legal advice. Tax treatment depends on individual circumstances and may change. Always seek professional advice before making financial decisions.
Estimates say the average number for UK workers is six but could be up to 12 for younger workers.
Either way, the idea of a job for life – and a pension to match – is for most people a thing of the past.
Thanks to auto-enrolment rules, all employers must now provide a workplace pension scheme. Combine this with regular job changes and potentially periods of self-employment and you have the prospect of dealing with multiple pension pots as you plan for retirement.
This could cause financial and logistical headaches, as well as a mound of paperwork. As a result, many people consider consolidating pensions into a single pot.
But is this always the right thing to do?
With inheritance tax (IHT) set to be introduced on pensions very soon, how does this process fit into your overall estate planning and preserving wealth for future generations?
And if you do decide to consolidate your pensions, how do you go about it?
Pension consolidation is a common issue which I come across when advising clients about their pensions and retirement planning so I’m going to take a practical look at consolidating pensions, the factors you need to consider and some of the things you need to watch out for.
A key consideration with consolidating pensions is the kind of pensions you possess. Broadly speaking, these can be divided into defined benefit pensions and defined contribution pensions.
Commonly known as ‘final salary’ pension schemes, these are less prevalent than they used to be, although some older pension savers and those working in specific sectors such as public services do have them.
With defined benefit pensions, how much you get when you retire is based on your salary and how long you’ve worked for your employer.
Generally, defined benefit schemes are not suitable for consolidation since you could lose value and benefits if you ‘transfer out’. In fact, it is mandatory to take financial advice if your defined benefit scheme is valued at £30,000 or more and you are considering transferring out.
Also known as ‘money purchase’ schemes, defined contribution pensions are the most common form of workplace and private pensions.
Defined contribution pensions are where you build up a pot of money based on the contributions you (and your employer, in the case of a workplace pension) have built up over time and which is invested by the pension firm operating the fund.
If you move jobs, you can either leave the pension where it is (even though you are no longer paying into it) or you can consolidate the pension by transferring it to a new pension scheme, whether that is a private pension or a workplace pension at a new employer.
Consolidating pensions can simplify administration and lower overall fees but you should still bear in mind several factors before deciding whether to stay or go, including:
It could be the case that if you have several different pensions, some may be better consolidating while others are best left alone.
This is one of the reasons why getting expert advice from an independent financial adviser is really important, particularly if you have complex pension arrangements or high value pensions.
At Fairstone, we can help you navigate your way through all these different considerations to come up with comprehensive recommendations about the best way forward.
If consolidating pensions is something you have decided to do, how should you go about it?
Get details on providers, policy numbers and current valuations of each pension pot. If you’re missing paperwork or can’t remember which provider was with which employer, then contact previous employers to get that information. If you think you have a pension but are unsure about the provider or the employer, try the free Government Pension Tracing Service who may be able to help.
Make sure you take a good look through the small print of each one of your pensions. As mentioned earlier, there could be perks you might miss out on or penalties you have to pay if you choose to consolidate a particular pension.
You might choose to transfer your pensions into your current workplace pension, an existing private pension or set up a brand new pension. Whichever route you choose, you should check out the rules on transfers to the destination pension to make sure you can carry out your plan.
If you’re sure you want to consolidate pensions then you should inform the provider of your destination pension of your plans. You will need to check that the scheme you want to transfer allows you to do so and that the destination pension will accept the transfer. If all that is fine, then the consolidation process can start.
A financial adviser can help with all four steps of the consolidation process outlined above, giving you expert insight into all aspects of the transfer and assisting with the various forms and paperwork required.
At Fairstone, we have helped many clients with advice on consolidating their pensions and assistance throughout the process.
As well as the nuts and bolts of combining pensions, a financial adviser can also help with the wider aspects of pensions and retirement planning to ensure your funds are working hard for you and that you are saving enough towards providing the retirement you want.
For example, with pension wealth attracting inheritance tax (IHT) from April 2027, getting expert advice on how best to preserve your pension could be crucial when it comes to estate planning and preserving wealth for future generations.
Your adviser can also help you plan for unexpected future events with advice on financial protection options.
And in a sector where scams are unfortunately a fact of life, consulting an independent financial adviser is a great way to sense-check pension offers which seem too good to be true.
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Consolidating your pensions can help cut down on costs, streamline your life admin and boost your retirement pot, but it’s a process which requires careful consideration.
Getting expert advice at an early stage can really pay dividends and help you on your way to a better retirement.
THIS ARTICLE IS FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSTITUTE FINANCIAL, TAX, OR LEGAL ADVICE.
TAX TREATMENT DEPENDS ON INDIVIDUAL CIRCUMSTANCES AND MAY CHANGE. ALWAYS SEEK PROFESSIONAL ADVICE BEFORE MAKING FINANCIAL DECISIONS.
When it comes to planning for retirement, the earlier you start, the better. But the reality is that many of us, especially those in our 20s and early 30s, don’t always prioritise saving for the future. Instead, we’re focused on the present – career progression and enjoying life. However, those who are committed every step of the way will reap the greatest rewards down the line.
Starting with small steps in retirement planning now can make your financial journey smoother as you approach retirement. As the retirement savings journey often spans several decades, it can be helpful to separate your plan into stages.
This will help you achieve the right blend of enjoying the present and funding your future.
The general recommendation is to save at least 15% of your income towards retirement. However, the amount you should contribute depends on your personal circumstances and retirement goals. Starting with smaller contributions is okay, but aim to increase your contributions as your income grows.
Let’s explore the different stages of life and how retirement planning fits in.
At this age, retirement may feel a long way off, but that’s exactly why it’s the perfect time to start. In your 20s and early 30s, you are likely to have fewer financial responsibilities than in later years, and this can work to your advantage. While retirement saving might not seem urgent, building a solid foundation early on will make a huge difference in later life.
The best time to start saving for a pension is when you’re young, as this gives your money more time to grow. Delaying contributions by even a few years can significantly reduce your final pension pot.
It’s estimated that postponing pension savings until middle age could mean missing out on up to £100,000 in investment returns and tax relief.
Fortunately, as soon as you begin working, you’ll typically be enrolled in your employer’s pension scheme automatically. By law, if you contribute 5% of your salary, your employer must add at least 3%.
Making the most of this scheme is essential for building a comfortable retirement fund. The earlier you start, the greater the benefits of compound growth over time.
Self-employed individuals don’t have access to workplace pensions, making personal retirement savings essential. Options like Self-Invested Personal Pensions (SIPPs), stakeholder pensions, and ISAs can provide tax-efficient ways to save.
Since income can fluctuate, setting up flexible contributions and using high-earning periods to boost pension savings can help ensure financial security. It’s also vital to check National Insurance contributions to qualify for the full State Pension, as self-employed workers must actively manage their contributions.
When deciding how to invest your pension, a long-term approach is key. Choosing assets with strong growth potential—such as stocks and shares—can help maximise returns. While investments can fluctuate in value, a longer investment horizon allows you to ride out market ups and downs.
A Self-Invested Personal Pension (SIPP) gives you more control over how your pension pot is invested. Unlike traditional pension plans, which have a limited range of investment options, a SIPP lets you choose from a wider variety of assets, including stocks, bonds, and property. If you’re confident in your investment knowledge or want more flexibility, a SIPP could be a good choice.
When you’re young, you have time on your side, which allows you to take more investment risks and benefit from the growth potential of the markets. Even though markets go up and down, you have decades before retirement, so short-term volatility tends to smooth out in the long run.
It’s essential to focus on your future during this phase, even if it feels distant.
Many young people receive financial gifts from parents or grandparents, often intended for long-term savings or investments. While these gifts can provide a valuable boost to retirement savings, they should be managed carefully.
Instead of spending them immediately, consider investing them in a pension, stocks & shares ISA, or other tax-efficient savings vehicles to maximise growth over time. Additionally, family gifts may have inheritance tax (IHT) implications if the giver passes away within seven years, so seeking financial advice on how best to structure these contributions can be beneficial.
Financial responsibilities tend to pile up by your mid-30s, with mortgage payments and childcare costs becoming major expenses.
On the plus side, career progression often leads to higher earnings, making it a great time to focus on retirement savings.
By now, your income has likely increased. Perhaps you’re further along in your career, maybe starting or have a family, and you may have more financial flexibility. With this increased earning power, it’s the ideal time to review your retirement plans and consider ramping up your contributions.
If you earn more than £50,270 a year, you can benefit from 40% tax relief on pension contributions. This means that for every £100 you invest in your pension, the actual cost to you is just £60. When combined with employer contributions, this presents a powerful opportunity to grow your savings.
By the time you reach your mid-40s, it’s crucial to assess whether your pension savings align with your retirement goals. You may have a clearer idea of the income you’ll need and the age at which you’d like to stop working, allowing you to fine-tune your savings strategy accordingly.
If you haven’t already, it’s time to speak with a financial adviser. Retirement is becoming more real, and a professional can help you understand exactly how much you need to save and at what age you would like to retire. A financial adviser can also help ensure that your retirement savings are aligned with your personal goals and provide insight into the best investment strategies.
Now is the time to make some important adjustments:
Consolidate your plans: If you have multiple pension pots, consider consolidating them into one plan. This will help simplify your retirement strategy and potentially reduce fees.
Maximise contributions: Aim to contribute more than the minimum required. If you’re able, topping up your pension with extra contributions will make a significant difference when you retire.
Update your beneficiaries: Ensure that the beneficiaries listed on your pension plans are up to date. This is particularly important if your life circumstances have changed, such as marriage or the birth of children.
Consider bonus or salary sacrifice: Some employers allow you to sacrifice a portion of your salary or bonus for pension contributions, giving you more flexibility and tax advantages.
Use your ISA allowance: Don’t forget about Individual Savings Accounts (ISAs). Using your ISA allowance each year provides additional tax advantages and flexibility.
By the time you turn 50, your focus on retirement savings should be sharper than ever—this is the stage to make significant progress toward your goals.
If your pension pot isn’t where you’d like it to be, don’t panic—you still have time to make a meaningful impact.
At this stage, many financial commitments begin to ease. You may be approaching the final years of your mortgage, and other expenses could start to decline. Meanwhile, earnings often peak in your 50s, creating the perfect opportunity to accelerate your retirement savings—especially if you need to catch up.
If you have spare cash in the bank that you don’t need immediate access to, consider boosting your pension through lump-sum contributions. The maximum you can contribute in a year while receiving tax relief is 100% of your earnings or £60,000, whichever is lower—this is known as your annual allowance.
Additionally, you may be able to contribute even more using the “carry forward” rule, which lets you use unused allowance from the previous three tax years.
As you approach 65, your retirement plans should be taking shape, with a clear understanding of the final steps needed to achieve your target income. Having a well-defined plan will make decision-making much smoother when the time comes to transition into retirement.
At this stage, you should be looking at the big picture and considering all the ways you can maximise your pension and savings before retirement. This could include consulting with a financial adviser to review your retirement strategy in detail.
Here are some key steps to take as you near retirement:
Conduct a pre-retirement review: Work with your financial adviser to conduct a full review of your pension plan, including how your benefits can be taken and how your finances will look post-retirement.
Consider SIPPs: A Self-Invested Personal Pension (SIPP) may be an option to give you more control over your pension investments. A SIPP lets you choose how your pension is invested, which could potentially help you boost your retirement income.
Understand your pension options: The rules around pensions are changing, and now that you’re getting closer to retirement, it’s important to understand how you can take your pension benefits. For example, you can start accessing your pension savings at age 55, but you should understand the different ways to draw your pension—whether that’s through lump sum payments, income drawdown, or purchasing an annuity.
State Pension forecast: Make sure you know how much you can expect from the state pension and whether you’re on track to receive it at the right time.
You might be wondering, “Can I withdraw my pension before 55?” The answer is generally no, unless you meet certain conditions such as ill health or specific pension schemes. While some people may consider early pension release, this is a complex issue and should be explored with a financial adviser to understand the long-term impact on your retirement funds.
Changes in employment, such as moving to part-time work or switching jobs, can impact your pension contributions and long-term retirement strategy. When changing jobs, it’s important to track and consolidate pension pots, ensuring your savings continue growing efficiently. If transitioning to part-time work, consider adjusting your savings strategy to maintain financial stability. Career breaks can also affect your National Insurance record, so checking contributions and making voluntary payments can help protect your State Pension entitlement.
Death Benefits: Understanding how your pension can pass to your beneficiaries is important for inheritance planning. You can use death benefit options to save on inheritance tax.
ISA Allowance: Continuing to use your ISA allowance is essential for flexibility in how you draw funds during retirement.
Investment Strategy: Review your investments carefully. You might want to shift toward lower-risk options as you get closer to retirement to preserve the value of your pension fund.
At this stage, your focus should shift from growing your wealth to ensuring it provides a steady income for the rest of your life.
Your primary goal is to make your retirement savings last, balancing security with flexibility. When it comes to drawing an income from your pension, you generally have two main options:
Choosing between these options requires careful consideration, as each has its advantages and drawbacks. With income drawdown, you have the freedom to access your money when needed, but there’s a risk of running out of funds. An annuity, on the other hand, provides financial security but is irreversible and leaves no remaining capital for inheritance.
However, you don’t have to pick just one. Many retirees opt for a mix of guaranteed and flexible income, striking a balance between security and control.
Once you reach State Pension age (currently 66, rising to 67 from 2028), you may also qualify for the full new State Pension, provided you have sufficient National Insurance contributions. At £203.85 per week, this can provide a valuable boost to your retirement income.
Retirement planning is a lifelong journey, and it’s important to stay focused on the long term. By starting early, increasing contributions over time, and consulting with professionals, you can ensure that your retirement years are comfortable and financially secure.
Whether you’re just starting out in your career or approaching retirement, making smart decisions about saving and investing now can set you up for success in the years to come. Start today, and let your future self, thank you for it!
It’s never too early to start! The earlier you begin saving for retirement, the better. Even if you’re in your 20s or 30s and feel retirement is far off, starting early allows you to benefit from compounding and gives you the flexibility to take more investment risks. The earlier you set up a pension and start contributing, the more time your money has to grow.
In most cases, you cannot access your pension before age 55 unless you meet specific conditions, such as ill health. Early pension release is generally not an option unless you are in one of these circumstances. It’s crucial to plan your pension withdrawals with care, as early access could reduce your pension pot when you need it most.
In your 20s and 30s, it’s essential to start contributing regularly to your pension plan, even if you can’t afford to make large contributions. Setting up a direct debit or salary deduction is a good way to ensure regular savings. If your employer offers a pension scheme, contribute enough to take full advantage of any matching contributions they offer, as this is effectively free money.
The general recommendation is to save at least 15% of your income towards retirement. However, the amount you should contribute depends on your personal circumstances and retirement goals. Starting with smaller contributions is okay, but aim to increase your contributions as your income grows.
A Self-Invested Personal Pension (SIPP) gives you more control over how your pension pot is invested. Unlike traditional pension plans, which have a limited range of investment options, a SIPP lets you choose from a wider variety of assets, including stocks, bonds, and property. If you’re confident in your investment knowledge or want more flexibility, a SIPP could be a good choice.
In most cases, you can access your pension savings from the age of 55. This could include taking a lump sum, income drawdown, or purchasing an annuity. However, taking funds early means you could reduce your retirement income in the long term, so it’s important to plan carefully with a financial adviser.
It’s essential to ensure your pension plan has up-to-date beneficiaries listed. This will make sure your pension pot is passed on to the people you want in the event of your death. Many pension schemes also allow you to specify how death benefits are paid, which could be used for inheritance tax planning.
If you change jobs, your pension from your previous employer doesn’t go away. You can leave it where it is, transfer it to your new employer’s pension scheme, or move it to a personal pension plan. It’s important to keep track of any pension pots you have from previous jobs to ensure they are well-managed and continue to grow.
Yes, you are entitled to a state pension when you reach the state pension age, which is currently 66 but will rise over time. The amount you receive depends on your National Insurance contributions throughout your working life. You can request a state pension forecast from the government to see how much you’re likely to receive.
There are several ways to boost your retirement savings, including:
We have over 1250 local advisers & staff specialising in investment advice all the way through to retirement planning. Provide some basic details through our quick and easy to use online tool, and we’ll provide you with the perfect match.
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THIS ARTICLE DOES NOT CONSTITUTE TAX, LEGAL OR FINANCIAL ADVICE AND SHOULD NOT BE RELIED UPON AS SUCH. TAX TREATMENT DEPENDS ON THE INDIVIDUAL CIRCUMSTANCES OF EACH CLIENT AND MAY BE SUBJECT TO CHANGE IN THE FUTURE. FOR GUIDANCE, SEEK PROFESSIONAL ADVICE.
THE VALUE OF YOUR INVESTMENTS (AND ANY INCOME FROM THEM) CAN GO DOWN AS WELL AS UP, WHICH WOULD HAVE AN IMPACT ON THE LEVEL OF PENSION BENEFITS AVAILABLE.
Dreaming of retiring early? Achieving early retirement requires strategic planning, disciplined saving, and smart decision-making. By focusing on financial independence and proactive management of healthcare expenses, pensions, and workplace benefits, you can significantly boost your chances of retiring early. Whether you aim to retire in your early 60s or even earlier, smart planning is always key.
In the early years of retirement, the focus often shifts to fulfilling long-held dreams and enjoying life to the fullest. Spending during this phase may be higher due to increased activity but tends to decline as activity levels decrease over time. However, expenses may rise again later in life, often due to growing care needs.
Many individuals overestimate their health or underestimate how long they will live. With increasing life expectancy, it is not uncommon for retirement to span over 20 years or more. However, as with most life scenarios, this is influenced by various factors, including personal health, lifestyle, and financial planning.
Retirement planning requires ensuring that lifetime expenses do not exceed income and accumulated assets, such as savings and investments. This balancing act can be challenging and requires careful evaluation of pensions, income streams, and anticipated changes in spending over time.
Investment returns and inflation also play a critical role in retirement planning. Inflation, in particular, can erode the purchasing power of fixed incomes or cash savings. As recent years have demonstrated, the cost of living can rise sharply, emphasising the need for financial strategies that adapt to economic fluctuations.
Goal setting is another crucial aspect of retiring early. Define clear financial and lifestyle goals and create a roadmap to achieve them. Whether it’s building a larger pension pot, reducing healthcare expenses, or maximising workplace benefits, every step brings you closer to financial independence.
Your pension pot is one of the most critical resources for retiring early. Start by reviewing your workplace pension schemes and personal savings to understand how much pension income they will provide. Explore how different scenarios—like speaking to your employer about salary sacrifice, increasing contributions or delaying withdrawals can impact your overall retirement savings and income.
Flexible pots and lump sum options offer ways to access your savings early, allowing you to fund your early retirement while maintaining financial stability. However, it’s essential to withdraw strategically to ensure your funds last. Retiring early also means you may need to bridge the gap until you reach the state pension age, so plan your withdrawals carefully.
Workplace benefits can be a game-changer when planning to retire early. If your employer offers a defined benefits scheme or a generous workplace pension, these can provide a reliable income stream. Survivor’s pensions and other benefits can also support your family’s financial security.
Redundancy pay can act as a financial springboard for early retirement. If you’ve received a redundancy payout, consider using it to boost your retirement savings or pay off outstanding debts. Combining redundancy pay with an early retirement deal can help you transition smoothly into your next phase of life, especially if you aim to retire in your early 60s.
For many aspiring early retirees, transitioning to a part-time role or adopting a phased retirement approach can provide both income and flexibility. A reduced work schedule allows you to test the waters of retirement while still contributing to your pension pot.
Work-from-home opportunities are another excellent option, offering the chance to earn income without the physical demands of commuting. This flexibility is particularly beneficial if mobility or mental health concerns arise. Mini retirements, where you take short breaks from work before fully retiring, can also help you build confidence in your financial plan while enjoying the benefits of downtime.
The exact amount depends on your lifestyle and expected expenses. A common rule of thumb is to save 25 times your annual expenses.
Yes, many pension schemes offer flexible pots or lump sum options that allow early withdrawals. However, early withdrawals may reduce your overall pension income, so plan carefully.
Invest in comprehensive health insurance. Consider setting aside a portion of your savings specifically for healthcare expenses.
Yes, part-time roles, freelance work, and phased retirement options can provide additional income while allowing flexibility. Work-from-home opportunities are particularly convenient.
Evaluate the financial implications, including redundancy pay and the impact on your pension pot. Ensure the deal aligns with your long-term retirement goals.
Stick to a budget, monitor your investments, and periodically review your financial plan.
Retiring early is a challenging but achievable goal. Working with an Independent Financial Adviser could help improve your chances of retiring early. By proactively managing healthcare costs, maximising your pension income, and leveraging workplace benefits, you can create a solid foundation for early retirement. Whether you opt for phased retirement, a part-time role, or a mini retirement, staying flexible and informed will increase your chances of success. With careful planning and determination, you can retire early and enjoy the freedom and fulfilment you deserve.
We have over 1250 local advisers & staff specialising in investment advice all the way through to retirement planning. Provide some basic details through our quick and easy to use online tool, and we’ll provide you with the perfect match.
Alternatively, sign up to our newsletter to stay up to date with our latest news and expert insights.
| Match me to an adviser | Our advisers |
THIS ARTICLE DOES NOT CONSTITUTE TAX, LEGAL OR FINANCIAL ADVICE AND SHOULD NOT BE RELIED UPON AS SUCH. TAX TREATMENT DEPENDS ON THE INDIVIDUAL CIRCUMSTANCES OF EACH CLIENT AND MAY BE SUBJECT TO CHANGE IN THE FUTURE. FOR GUIDANCE, SEEK PROFESSIONAL ADVICE.
THE VALUE OF YOUR INVESTMENTS (AND ANY INCOME FROM THEM) CAN GO DOWN AS WELL AS UP, WHICH WOULD HAVE AN IMPACT ON THE LEVEL OF PENSION BENEFITS AVAILABLE.
Christmas is the season of giving, and for many, it’s an opportunity to make a meaningful impact on the lives of loved ones. Beyond the charm of wrapped presents, monetary gifts can offer long-term benefits, helping younger generations save for education, buy a home, or invest in their future. However, ensuring that your generosity aligns with UK financial rules and tax regulations is essential for maximising the impact of your gifts.
Understanding the rules surrounding gifting is not just a matter of legal compliance—it’s the key to making your financial presents as effective and worry-free as possible. This guide will walk you through the essentials of gifting money in the UK, helping you make informed and confident choices this festive season.
With proper planning, your holiday generosity can bring both immediate joy and lasting financial security to your family. Here’s what you need to know to make your monetary gifts count without unintended tax implications.
You can technically gift as much money as you wish to your children or grandchildren. However, the amount you gift, and the timing of your generosity can have an impact on the Inheritance Tax position of your estate further down the line.
The annual tax-free gifting allowance enables you to give up to £3,000 per year without it being subject to Inheritance Tax (IHT). If you didn’t use last year’s allowance, you can combine it to gift up to £6,000 this tax year.
It is also worth keeping the seven year rule in mind when gifting – especially if you are gifting significant sums or assets. If you live for more than seven years after making a gift, no IHT will be due on the respective gift but care is needed, as in certain circumstances, gifts going back up to 14 years can be caught. Advice on the order of gifting is really important.
HMRC allows for several exemptions that make gifting money tax-efficient:
In the UK, there isn’t a specific “gift tax” in the way some countries define it. However, monetary gifts are considered under the umbrella of IHT. As we previously mentioned, if you pass away within seven years of giving a gift, it may be liable to IHT depending on the total value of your estate and the timing of the gift.
Some gifts are fully exempt from tax:
Potentially Exempt Transfers are gifts that may become exempt from tax, depending on how long you live after giving them. Taper relief reduces the tax rate on gifts made three to seven years before your death. It’s really important to note that Taper relief only applies if the total value of gifts made in the 7 years before you die is over the £325,000 tax-free threshold.
| Years Between Gift and Death | Tax Rate |
| Under 3 | 40% |
| 3-4 | 32% |
| 4-5 | 24% |
| 5-6 | 16% |
| 6-7 | 8% |
| 7+ | 0% |
To minimise the inheritance tax burden on your family:
Can I give £3,000 to each child I have?
No, the £3,000 annual exemption applies to you, not your recipients. You can divide it among children or double it to £6,000 if your spouse also gifts.
What’s the best way for grandparents to gift money?
Contributing to living expenses, Junior ISAs, or setting up a trust are common approaches. Tailor the method to your grandchildren’s needs and your financial goals.
Do I need to declare cash gifts to HMRC?
No declaration is required for gifts within the £3,000 allowance or covered by exemptions. For larger gifts, recipients may face IHT if you pass within seven years.
Will HMRC find out about gifts after someone dies?
Yes, executors must report gifts made within seven years to ensure accurate IHT calculations.
Are all gifts subject to the Seven-Year Rule?
No. Tax-free gifts such as those within the £3,000 exemption or to a spouse/charity are not subject to this rule.
Can my child be a beneficiary of my Life Insurance?
Yes, but children under 18 will need a guardian to manage the payout. Consider writing the policy in trust to prevent it from counting towards your estate.
This Christmas, consider how gifting money can create lasting impacts for your loved ones. By understanding the rules and planning strategically, you can spread joy and ensure your family benefits from your generosity in the most tax-efficient way. If in doubt, consult a financial adviser to make your festive giving as impactful as possible.
How Inheritance Tax works: thresholds, rules, and allowances: Rules on giving gifts – GOV.UK
THIS ARTICLE DOES NOT CONSTITUTE TAX, LEGAL OR FINANCIAL ADVICE AND SHOULD NOT BE RELIED UPON AS SUCH. TAX TREATMENT DEPENDS ON THE INDIVIDUAL CIRCUMSTANCES OF EACH CLIENT AND MAY BE SUBJECT TO CHANGE IN THE FUTURE. FOR GUIDANCE, SEEK PROFESSIONAL ADVICE.
THE TAX TREATMENT IS DEPENDENT ON INDIVIDUAL CIRCUMSTANCES AND MAY BE SUBJECT TO CHANGE IN FUTURE.
THE FINANCIAL CONDUCT AUTHORITY DOES NOT REGULATE TAX AND TRUST ADVICE
In a significant shift announced by Chancellor Rachel Reeves, inherited pensions will become subject to Inheritance Tax (IHT) from April 2027. This marks a departure from previous rules where pensions were excluded from IHT calculations. Currently, pensions are usually passed on tax-free if you die under the age of 75 – or taxed at the beneficiaries’ marginal rate of Income Tax if you die over 75 – but in most cases, pensions don’t attract IHT.
This announcement is expected to impact roughly 8% of estates annually, as those who have heavily saved in pensions to lower their IHT liabilities now face new tax burdens.
Additionally, the IHT tax-free threshold remains frozen at £325,000 (your property, money and possessions) until 2030. If your assets include the family home that you’re giving away to children or grandchildren, you also receive up to a £175,000 residence nil rate band. As property and asset values rise, more estates will likely fall above this threshold, incurring IHT at the standard 40% rate.
Autumn Budget 2024Download our full guide to the Autumn Budget 2024 as we explore the spending plans set by the Chancellor, Rachel Reeves. |
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Chancellor Reeves emphasised that these adjustments aim to make the IHT system fairer, ensuring wealthier estates contribute more to public finances. Also, starting April 2026, reductions in agricultural and business property relief will be introduced. The first £1 million of such assets will remain tax-free, with a 20% IHT levied beyond that, including on Aim shares.
Retirees may need to reassess their long-term financial plans, as defined contribution pension funds could attract up to 40% IHT. Despite these changes, no adjustments to existing gifting rules were announced.
With over 1,250 local advisers and staff, we’re here to help you address any financial needs arising from the Autumn Budget – from investment advice to retirement planning. Simply provide a few details through our quick and easy online tool, and we’ll match you with the ideal adviser.
Alternatively, click below to download our comprehensive guide to the Autumn Budget.
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THIS ARTICLE DOES NOT CONSTITUTE TAX OR LEGAL ADVICE AND SHOULD NOT BE RELIED UPON AS SUCH. TAX TREATMENT DEPENDS ON THE INDIVIDUAL CIRCUMSTANCES OF EACH CLIENT AND MAY BE SUBJECT TO CHANGE IN THE FUTURE. FOR GUIDANCE, SEEK PROFESSIONAL ADVICE.
A PENSION IS A LONG-TERM INVESTMENT NOT NORMALLY ACCESSIBLE UNTIL AGE 55 (57 FROM APRIL 2028 UNLESS THE PLAN HAS A PROTECTED PENSION AGE).
THE VALUE OF YOUR INVESTMENTS (AND ANY INCOME FROM THEM) CAN GO DOWN AS WELL AS UP, WHICH WOULD HAVE AN IMPACT ON THE LEVEL OF PENSION BENEFITS AVAILABLE.
YOUR PENSION INCOME COULD ALSO BE AFFECTED BY THE INTEREST RATES AT THE TIME YOU TAKE YOUR BENEFITS.
Chartered Financial Planner, Hannah Rogers explains how and why to revisit your retirement plan.
If you are in your 40s or 50s, it’s likely that you will have been contributing towards your pensions for decades now. You may have accumulated multiple workplace pensions at this point. And you could have investment strategies in place with one eye on your retirement.
But when was the last time you thoroughly examined your pension and retirement plan?
A comprehensive, documented retirement plan will help you feel prepared for the future. Giving you peace of mind that you will have sufficient income when you take a step back from working.
Throughout this article, we explore the key considerations for reviewing your retirement plan. And if you don’t have a plan in place, this will be a helpful starting point.
Retirement looks different from person to person. Maybe you’re looking to spend more time with your family; travelling to your bucket list destinations might be high on your agenda; or maybe you’re looking to start a new hobby, or even a new business.
Knowing what you actually want to do in your retirement is key. You can then start to determine how much money you will need. The more granular you be, the better. You will need to take everyday expenses, such as mortgage payments, household bills and even your grocery shopping into account.
Set savings aside as a contingency plan too so that if there are any emergencies, medical needs or care plans which you need later down the line, you won’t have to worry.
Factoring inflation into your plans is always a wise move. As the last few years have shown, inflation rates can fluctuate dramatically. By taking inflation into consideration, you will build a really solid foundation for your retirement.
Plans can easily change, especially when it comes to retirement. External factors may force you to retire earlier or later than you originally planned. Therefore, it is worth revisiting whether you would still like to retire at the same age as you had originally planned to.
Once you know your answer, you’ll need to decide on how much money you will need to sustain the lifestyle you desire throughout retirement.
Divide this number into an annual salary and then a monthly income. This will help you to see if your savings will see you through.
It’s more than likely that you have multiple pensions as part of your retirement plan. A combination of your personal pensions, workplace pension, state pension, ISAs and investments could all constitute part of your plan.
These 4 quick tips should be kept front of mind, when reviewing your overall retirement pot:
Regularly reviewing your retirement plan is always a good idea. It will ensure that you are on track to achieving the retirement income you need in order to live the lifestyle you want.
An annual review is usually sufficient. It is regular enough to ensure that you can accommodate any changes in priorities or circumstances. But it also gives you enough of a break to ensure you don’t become anxious about the health of your pension and short-term performance.
If you are eligible for State Pension, the amount you receive will depend on your National Insurance contribution record.
It’s unlikely that the State Pension alone will be able to support your retirement. You can check your State Pension forecast to see how much you could receive, when you can claim it and if you can improve it here.
In the UK you can access some, or all of your pension benefits from age 55. This will increase to 57 from April 2028 onwards.
Your own unique circumstances will influence which income option is right for you. It’s worth noting that some contracts will restrict your options, and there are tax implications to consider too.
Your retirement plan will be entirely unique to you, your current position and future aspirations. We’re here to help you create a watertight retirement plan, helping you navigate your financial future with confidence.
Whether you’re starting your retirement planning from scratch, or you’re checking in with plans you have already made, our team of advisers are here to support you.
THIS ARTICLE DOES NOT CONSTITUTE TAX, LEGAL OR FINANCIAL ADVICE AND SHOULD NOT BE RELIED UPON AS SUCH. TAX TREATMENT DEPENDS ON THE INDIVIDUAL CIRCUMSTANCES OF EACH CLIENT AND MAY BE SUBJECT TO CHANGE IN THE FUTURE. FOR GUIDANCE, SEEK PROFESSIONAL ADVICE.
Retirement behaviours are shifting. 78% of retirees have dipped into their pension pots before they actually retire [1]. Whether it’s for unexpected expenses, the desire to be debt-free or the need for additional income.
The reality is that immediate financial needs can often overshadow the long-term benefits of leaving pension pots untouched. But the implications of withdrawing funds from your pension early are multi-faceted. In fact, it can have a significant impact on your financial future.
In this article, Nick Hooper, IFA, discusses the true cost of accessing your pension pots too early.
In the UK, you can access some or all of your pension for the age of 55 (this will be changing to 57 from 2028 onwards).
If you choose to withdraw funds from your pension early, you could miss out on compound growth which could only be achieved if the money had remained untouched.
This can have a real knock-on effect to your overall pension. Meaning that you have a smaller pot to rely upon, further down the line. It’s often these later years in retirement when the need for stability is greater.
As life expectancy continues to grow, and retirement periods extend, it’s more important than ever to take the timing of your pension into account. This will help to ensure that you stay within your savings, with access to the funds you need.
The average amount that an individual withdraws from their pension by age 65 is £47,000.
If we apply financial modelling to this number, we can see how much that £47,000 would increase if it had stayed invested. For just five more years, that individual would have accumulated £13,925 more. And if it were to stay invested for ten years instead of five, that figure is likely to surpass £24,661. An increase of more than 50%.
Assuming that the maximum tax-free cash available was used (at age 55 his currently stands at 25%, equivalent to £11,750). If the remaining £35,250 remained invested, you would on average, be over £10,400 better off after five years and nearly £18,500 after ten years.
Sometimes, early withdrawals will be unavoidable. But as these numbers show, draining your pension too soon can compromise your financial security in the future.
One way in which you can build a financial safety net is by diversifying your income streams. With different sources of income and investments, you can really reduce the need to dip into your pension funds too early.
Comprehensive financial planning also helps to ensure that you can maintain your desired lifestyle without compromising your finances upon retirement. By understanding the impact of early withdrawals and having alternative options, you can make informed decisions to benefit you in the long-term.
Dipping into your pensions early can severely impact your long-term financial security once you have retired. With this in mind, the safest bet is to seek financial advice from a professional before making any short-term decisions which could have long-term consequences.
If you are starting to plan for your retirement, or you are taking your pension options into consideration, it’s absolutely critical to know how early withdrawals can impact your financial security.
Get in touch with one of our advisers to delve into your options and create a retirement plan which is tailored to you and your goals.
[1] Scottish Widows conducted research into workplace pension scheme customers’ behaviour across 232,654 claims between 2019-2023. The data revealed that the average a customer withdraws by the age of 65 is £47,000 and that 78% of retirees have taken money from their pension pots before they reach their selected retirement age.
THIS ARTICLE DOES NOT CONSTITUTE TAX, LEGAL OR FINANCIAL ADVICE AND SHOULD NOT BE RELIED UPON AS SUCH. TAX TREATEMENT DEPENDS ON THE INDIVIDUAL CIRCUMSTANCES AOF EACH CLIENT AND MAY BE SUBJECT TO CHANGE IN THE FUTURE. FOR GUIDANCE, SEEK PROFESSIONAL ADVICE.
A PENSION IS A LONG-TERM INVESTMENT NOT NORMALLY ACCESSIBLE UNTIL AGE 55 (57 FROM APRIL 2028 ONWARDS) UNLESS THE PLAN HAS A PROTECTED PENSION AGE.
THE VALUE OF YOUR INVESTMENTS (AND ANY INCOME FROM THEM) CAN GO DOWN AS WELL AS UP, WHICH WOULD HAVE AN IMPACT ON THE LEVEL OF PENSION BENEFITS AVAILABLE.
YOUR PENSION SAVINGS ARE AT RISK BEING ERODED BY INFLATION.
While the gender pay gap has gained significant attention, the gender pension gap remains a critical yet often overlooked issue. This gap signifies that women retire with significantly less pension savings than men, that can result in financial difficulties in later years.
It’s important to try and understand the factors driving this disparity and taking early, informed steps are crucial for young women to secure their financial futures. By educating and guiding the next generation, we can work towards preventing future generations from facing the same challenges. Our awareness and encouraging them to take a proactive approach is essential to bridging the pension gap and ensuring a more equitable retirement for all.
The gender pension gap refers to the disparity in pension savings and subsequent retirement income between men and women. According to research from the Department for Work & Pensions, the gap in private pensions currently stands at 35%. This stark difference means that for every £100 a man has in pension savings, a woman has only £65. This gap is particularly concerning as women tend to live longer than men and therefore need their pension savings to last longer.
Several factors contribute to the gender pension gap, one of the primary ones being the gender pay gap. Historical and ongoing pay inequalities mean that women’s salaries often lag behind those of their male counterparts, which directly impacts their ability to contribute to their pensions.
Research also shows that career breaks for caregiving responsibilities can also play a significant role. Women are more likely to take more time off work to raise children or care for elderly relatives, which interrupts their pension contributions and reduces their overall savings. Upon returning to the workforce, many women opt for part-time work to balance their caregiving duties, which further limits their pension contributions.
Societal expectations and financial pressures can also deter young women from starting their pension savings early. While 19% of men begin contributing to their pension by age 22, only 14% of women do so. Early contributions are crucial as the power of compound interest significantly benefits those who start saving earlier.
Despite the clear benefits of early savings, many young women miss out on the opportunity to build their pension pots from a young age. This missed opportunity is important because the pension gap widens with age. While the difference in pension values between men and women is 10% at the age of 25, it grows to a staggering 50% by age 50.
A recent survey highlighted that 10% of young women have opted out of their employer’s pension scheme, risking their chances of a comfortable retirement. Opting out of an employer’s pension scheme can have severe long-term consequences. Those who opt out miss out on employer contributions and compound interest gains.
While the gender pension gap has been narrowing, it is doing so at an almost glacial pace. Between 2006 and 2020, the gap shrank by 7%, but this rate is insufficient to prevent generations of women from facing substantially poorer retirements than men. One of the most significant factors in closing this gap has been the introduction of auto-enrolment for workplace pensions. Auto-enrolment, which began in the UK in 2012, has led to a vast increase in the number of women saving into pensions.
However, while auto-enrolment has helped increase participation, it alone cannot close the pension gap. More comprehensive reforms are needed, such as providing more flexible working arrangements and affordable childcare to enable women to return to work and build their pensions.
Young women can take several steps to close their personal pension gap. Starting early is crucial. The earlier you start contributing to your pension, the more you benefit from compound interest. Even small contributions in your 20s can grow substantially over time. Ensuring you are enrolled in your workplace pension scheme and taking full advantage of any employer matching contributions is another essential strategy. This ‘free money’ can significantly boost your pension pot.
Additionally, increasing your pension contributions, even by a small amount, can have a significant impact. For instance, an extra £50 per month can substantially increase your retirement savings over time due to the power of compounding. Sharing the load of career breaks, if possible, and continuing to contribute to your pension during any breaks will also be beneficial. For those taking maternity leave, considering increasing contributions before leave can help mitigate the impact of lower contributions.
Utilising government schemes can also be beneficial. Signing up for child benefit in the mother’s name ensures continued state pension entitlement while out of the workplace. If your partner can afford it, they could cover your pension contributions while you are taking care of your children. Anyone can pay into someone else’s private pension, and if you aren’t earning, your partner can pay up to £2,880 a year into your pension, which will be boosted to £3,600 with tax relief.
By understanding the importance of starting early, maximising contributions, and utilising available resources, young women can take control of their financial futures. While policy changes at the government level are essential, individual actions can also make a significant difference.
Are you taking control of your financial future? Start today by reviewing your pension contributions and seeking professional advice if needed. For more information or personalised advice on enhancing your retirement planning, consider reaching out to financial planners who can offer expert guidance tailored to your individual needs.
By raising awareness about the gender pension gap and the steps needed to close it, we can help ensure that more women enjoy a financially secure retirement. The disparity between retirement expectations and reality for young women is concerning, but with proactive measures, it is possible to achieve a brighter financial future.
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Recent research findings have brought to light a striking observation: fewer than 10% of adults in the UK contribute occasional lump sums to their pensions[1]. This statistic is particularly surprising given that such contributions could significantly amplify one’s retirement savings.
Analysis reveals that even modest lump sum investments can significantly increase the overall size of one’s pension pot due to the power of compound growth over time. For example, starting with an annual salary of £25,000 and contributing the auto-enrolment minimum (5% from the employee and 3% from the employer) from age 22 could lead to a retirement fund of around £434,000 by 66 [2].
Yet, by adding nine lump sum payments of £500 every five years from age 25 to 65, one could enhance one’s retirement savings by an additional £11,000. Those capable of making heftier contributions, such as £5,000 every five years, could see their pension pot grow to £549,000, which is £115,000 more than without any lump sum additions, not accounting for inflation.
Encountering unexpected financial windfalls, whether through bonuses, gifts or other means, often tempts immediate expenditure. Currently, many are directing these extra funds towards managing monthly expenses. However, those who are financially able to contribute additional amounts to their pension stand to benefit significantly in the long term.
Pensions offer tax efficiency and the potential to outpace both inflation and interest rates on savings accounts, making them a wise choice for securing one’s financial future. With the end of the fiscal year having passed, and with it the expectation of annual bonuses for many, allocating a portion of this windfall towards a pension could substantially impact one’s retirement lifestyle.
Employers and pension providers play a crucial role in educating individuals about the importance of long-term financial planning. It is essential to illustrate how pensions fit within a broader financial context, ensuring individuals perceive retirement savings as a key component of their overall financial strategy.
These efforts can empower individuals with the knowledge and resources needed to make informed decisions about their financial future, fostering a proactive engagement and planning culture.
If you seek further insights into maximising your retirement savings through lump sum contributions or require personalised financial planning advice and wish to explore how to enhance your financial security and prepare for a comfortable retirement, please get in touch with us. Let us help you navigate your path towards a financially secure and fulfilling retirement.
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[1] Boxclever conducted research for Standard Life among 6,350 UK adults. Fieldwork was conducted 26 July–9 August 2023. Data was weighted post-fieldwork to ensure the data remained nationally representative on key demographics.
[2] Calculations assume the following: Starting salary £25,000 – Employer contributions 3.00% – Employee contributions 5.00% – Investment growth 5.00% – Salary growth 3.50% – Annual investment costs 1.00%
THIS ARTICLE DOES NOT CONSTITUTE TAX OR LEGAL ADVICE AND SHOULD NOT BE RELIED UPON AS SUCH. TAX TREATMENT DEPENDS ON THE INDIVIDUAL CIRCUMSTANCES OF EACH CLIENT AND MAY BE SUBJECT TO CHANGE IN THE FUTURE. FOR GUIDANCE, SEEK PROFESSIONAL ADVICE.
A PENSION IS A LONG-TERM INVESTMENT NOT NORMALLY ACCESSIBLE UNTIL AGE 55 (57 FROM APRIL 2028 UNLESS THE PLAN HAS A PROTECTED PENSION AGE).
THE VALUE OF YOUR INVESTMENTS (AND ANY INCOME FROM THEM) CAN GO DOWN AS WELL AS UP, WHICH WOULD HAVE AN IMPACT ON THE LEVEL OF PENSION BENEFITS AVAILABLE.
YOUR PENSION INCOME COULD ALSO BE AFFECTED BY THE INTEREST RATES AT THE TIME YOU TAKE YOUR BENEFITS.
