Planning for your retirement is one of the most important financial actions that you can take. Not planning will mean you may not enjoy the retirement you hope for. However, making mistakes in your planning can also be problematic. In this article we’ll discuss some common retirement planning mistakes and explain why you should avoid them.
Misjudging State Pension age
When planning for retirement, if you misjudge the age you’ll receive your State Pension, you could have less income than expected. The UK is currently in a period where the State Pension age is increasing. Currently, the State Pension age is 66, and is set to rise to 67 between 2026 and 2028. This rise will affect those born on or after 6th April 1960. There will be a further rise in State Pension age, to 68, between 2044 and 2046. This will affect those born on or after 6th April 1977.
It’s important to remember, though, that the age you can draw your State Pension is subject to change. When retirement planning, therefore, you should ensure you’re using the most up-to-date State Pension age that applies to you. Your current State Pension age can be checked on the government website.
Underestimating future income needs
In retirement planning, it’s important you factor in how many years of retirement you may have. There is a longer life expectancy on average now compared to 20 years ago. Office for National Statistics data in 2025 showed that for women who are age 60 today, they can expect to live to age 87. Indeed 25% can expect to live until 95, with 1 in 10 living to 99. For men who are age 60 today, average life expectancy is 84. 1 in 4 will live, on average, to 92, with 1 in 10 having a life expectancy of 96.
As you can see, if you retire at State Pension age, you may have 30 years of retirement to fund! It is imperative that your retirement planning takes this into consideration.
Assuming your State Pension will be enough to live on
The State Pension is a regular payment from the government that you can claim when you reach state pension age. There are eligibility criteria you must meet to be able to claim this income in your retirement. A minimum of 10 qualifying years of National Insurance contributions makes you eligible for State Pension. However for a full State Pension, you must have 35 years of National Insurance contributions.
The State Pension is in place to provide a basic level of financial security in retirement. However, the amount you’ll receive is likely to be considerably lower than the salary you received in your working years. The new State Pension is currently £12,547.60 per year, or £241.30 per week. The State Pension is currently protected by the Pension Triple Lock to ensure it increases each year with the rising cost-of-living. With increasing pressure on government spending, though, there is no guarantee how long this protection will be in place for.
Assuming that no additional income streams will be required to support you financially in your retirement is a potentially costly mistake. This assumption will mean your standard of living will need to reduce significantly in retirement, for financial reasons. Having private pensions that you have contributed to throughout your working life will give additional income in retirement. This may give greater financial security, and allow you to enjoy the retirement you planned for.
Failing to plan what you want your retirement to look like
One of the first steps you should take in retirement planning is deciding what you want your retirement to look like. Your decision will have an impact on the level of financial support you will need to finance it. For example, should you choose to spend your retirement travelling the world, you’ll need more money than if you are planning to provide childcare for grandchildren at home.
The Retirement Living Standards, published each year by Pensions UK along with Loughborough University, give an indication of average income requirements for different living standards. The most recent data for income required, after tax, shows:
Minimum standard (covering all essentials, with some left over for fun): £13,900 (1 person) | £22,500 (2 people)
Moderate standard (providing more financial security and flexibility): £32,700 (1 person) | £45,400 (2 people)
Comfortable standard (allowing more financial freedom and some luxuries): £45,400 (1 person) | £62,700 (2 people)
These figures allow you to more accurately plan the financial resources you’ll require, and where they’ll come from, to allow for the type of retirement you want.
Paying too much in fees for multiple pension providers
If you have worked for more than one company since 2012, you may have multiple workplace pensions. When you left the company, contributions will have ceased to be made from both you and your employer. However the pension pot will have continued to be managed by the pension provider. Management fees are charged by the pension providers for this service. This could mean you are paying too much in management fees than necessary. The fees are taken from your pension pot, so you could be left with less money in your retirement than you expected.
Consolidating your pension pots could be the answer. This is where multiple pension pots are brought together into a single portfolio. There are many benefits to consolidating into a single pension portfolio, but there are also some things to consider. Learn more in our recent blog post.
Before you make a decision on whether to consolidate your pensions, we’d recommend contacting a financial expert such as the team at Willday Wealth Management. They can look at your personal financial circumstances, and help you determine if it’s the right move for you. Call us on 0116 222 0119 or email hi@willdaywm.co.uk – we’ll be happy to help.
Not reviewing your pension pots
If you’ve opened a pension and are making regular contributions, you may think you have avoided a common retirement planning mistake. However if you neglect to review your pension, you could be making a mistake here. Not only may your personal circumstances have changed, impacting your pension, but world affairs can cause an impact too. For example, the birth of grandchildren may change your priorities in retirement. If your retirement plans change, so may your financial needs in retirement, requiring adaptations to your pension contributions.
Equally, outside factors may impact you. When Trump imposed tariffs on products imported into the US, the markets were affected. When factors affect the stock markets, your pensions are potentially at risk. As pensions are long-term investments, there is a greater chance for this volatility to calm and any impact be nullified. However for those nearing retirement it can be more significant.
By reviewing your pension pots regularly, you’ll be able to plan your retirement with the latest financial information at your fingertips. This, in turn, will allow you to plan more effectively.
Putting off saving for retirement until later in life
The younger you are, the more you may think that you can delay starting to save for your retirement. Retirement age may seem a long way off, but the earlier you start to save, the longer your money has to work hard for you. The power of compound interest means it is beneficial to have your money invested in a pension for longer. This is because you will achieve growth* on previous growth as well as your contributions. The longer your pension is invested, the more opportunity it has to lessen the effects of market volatility too, as discussed earlier.
If you have previously made the mistake of waiting to start contributing to a pension, don’t worry. It’s never too late to start making these financial arrangements. Even if you do not start contributing to a pension until you are 55, assuming you retire at State Pension age, you’ll still have 12 years of contributions before retirement.
Not factoring inflation into your retirement planning contributions
When retirement planning, you should always factor inflation into your calculations. Inflation is an indicator of the cost of living – the higher the inflation rate, the greater the cost of living compared to the previous year. Whilst inflation levels don’t have a direct impact on private pensions, they can directly impact the State Pension as part of the Triple Lock calculation.
Inflation should be part of your pension growth calculation to determine how it has grown (or not) in real terms. Usually pensions outperform inflation, but this is not always the case. If inflation is higher than your pension’s growth* rate, it will mean that you can buy less with your pension pot. For example, a £100,000 pension pot 10 years ago would enable you to buy a lot more than you can with a £100,000 pension pot now. This is another reason you should review your pensions regularly.
Learn more about how inflation can impaction your investments in our recent blog post.
Paying more tax than is necessary
If you do not take advantage of tax efficient opportunities, you could be paying more in tax than you need to. This, in turn, will reduce the funds you have available to you in retirement. Tax efficient investment opportunities include pension contributions, investing in an ISA, or saving for your child’s future in a Junior ISA. For each of these, any growth* achieved is exempt from tax, meaning you keep more of your money.
Contact our team to discuss which tax efficient options are best for your personal and financial circumstances.
Help with your retirement planning
Looking for help with your retirement planning to make sure you avoid the mistakes we’ve discussed in this article? We recommend getting professional financial advice, such as from the Willday team. We’ll help you ensure you’re making the right decisions to achieve the optimal retirement for you. This may include where to invest and in what form (pensions or ISAs, or a mix of both). Plus we’ll advise on how and when to draw down from your pensions efficiently.
Our team will help you build a portfolio of investments that will help you to reach your retirement goals. Contact us by calling 0116 222 0119 or emailing hi@willdaywm.co.uk to get started.
*With investing your capital is at risk and you may get less than what you invested
