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Fast-track your way to early retirement

There is no longer a ‘default’ retirement age in the UK. This was where an employer could force an employee to retire, but the law was abolished in 2011. When speaking of retirement age now, we are usually referring to State Pension age. This is currently 66, but there is a planned, phased increase in this age from May 2026 to 67 and then to 68. State Pension age does not mean you’re not able to retire before that age. It simply means you’ll not receive a State Pension until then. Those with Private Pensions may draw down from it earlier, usually from age 55, however there are also plans to increase this to 57 in 2028 then 58 around 2034. Those retiring before State Pension age are said to have taken early retirement.

Couple sitting on a bench overlooking the sea

Factors to consider when planning an early retirement

If you are thinking about taking early retirement, you should consider the income you’ll have during this time. Remember, any income received is subject to income tax if you earn more than your annual personal allowance, this is currently £12,570 for most people but may vary. You can check yours on the government website here.

If you’ll be drawing from a private pension, you’ll need to check the conditions around your policy. It will detail the age from which you can draw from it. You are usually able to take 25% of the total value of your personal and workplace pension tax free. The remainder of the pension pot is subject to income tax. The tax-free amount may be taken as a lump sum, or in instalments.

In order to determine if early retirement is financially viable for you, set out a plan. Think about what kind of retirement you’d like, for example if it includes travel or larger purchases. Determine if your expected income will be sufficient to allow you the retirement you desire. Start by calculating your basic financial requirements. Add costings for any additional requirements you have in order to have your dream retirement. Once all your requirements are detailed, you’ll have an idea of what your required income will be. If your private pension will cover this, it sets you in good stead for early retirement.

Older couple planning

To reduce your monthly outgoings in retirement, thus reducing your income requirements, plan to reduce any debts. If you are able, pay off outstanding debts including car payments, credit cards and your mortgage. Additionally, try to avoid taking on any new debt.

Looking for missing pensions?

Did you know, recent research has found that around £37bn in UK pensions are “lost”? Since 2012, all eligible employees will have been auto-enrolled into workplace pensions. If you have worked for more than one employer in this time, changed your name or moved house, you may have missing pensions. Previously lost pensions may assist your early retirement planning as it may increase the pension pot available to you.

How can you find out if you have missing pensions? Our Find My Pension service is here to help! Simply complete our short form, and we’ll begin contacting 100 pension providers to find any pensions you hold with them. We’ll locate any missing pensions and discuss with you about consolidating them into one pension pot.

How we can help you plan for early retirement

The earlier you start planning for retirement, the longer you have to build up you pension pot. The larger your pension pot, the more feasible early retirement may be for you. Planning is essential, though. Whilst it’s impossible to foresee the future, you should endeavour to ensure your plan to retire early is future-proofed. Ensure it’s the best and right decision for you not just now, but for the years to come, too.

Here at Willday Wealth Management, we can help you with this. We’ll discuss with you all you need to know about early retirement and your pensions. This will include when to start saving, the size of pension pot you’ll need and how to access your pension. Contact us today to schedule a consultation with one of our financial experts, and start planning for your early retirement!

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