The way we retire is changing.

Gone are the days of finishing work at 60 or 65, then living a few short years until we chalk up ‘three score years and 10’.

Three things are changing the face of retirement in the UK:

  1. The State Pension age is changing; being equalised for men and women, and rising for both to 66 from 2020, and to 67 between 2026 and 2028
  2. We are living longer; in 1981 the average life expectancy for men was 71 and 77 for women, a generation later in 2011 these had risen to 79 for men and 82.8 for women (Source: ONS)
  3. The introduction of Pension Freedoms in 2015 removed restrictions on the amount we can withdraw each year from our pensions

Many of us are planning to retire early too. Research from Prudential shows that 60% of people giving up work in 2017 are doing so before their State Pension age or company pension retirement age.

However, the same study shows that those people who finish work early expect to receive £1,250 less per year than those who continue working to their selected retirement age.

So, how can you retire early, but without taking a hit on your retirement income? Here’s our top five tips:

1. Take the help that’s on offer

Over the years it’s fair to say that pensions have been given a bad press. Much of which has been unfair, especially when we consider that people retiring early are more likely to have saved into a pension than those who will work until their planned retirement age. (Source: Prudential).

Pensions provide a disciplined way of saving for retirement, with the money locked away until at least 55.The tax-relief on contributions, along with employer contributions for members of workplace pensions, provides a significant boost to your retirement savings. Furthermore, the rules surrounding what happens to your pension when you die have changed considerably over recent years, making it easier to leave your remaining fund to your loved ones when you die.

2. Plan ahead

Early retirement takes careful planning.

At every age, from your 20s, 30s and 40s, when you are accumulating assets in pensions and other investment vehicles such as ISAs (Individual Savings Accounts), to your 50s and 60s when you need to turn your capital into a sustainable income, having a strategy and a plan is crucial.

As the old saying goes: “Fail to plan, plan to fail.” Never has that been truer than in respect of retirement planning.

3. Take advantage of Pensions Freedom rules

Prior to their introduction in April 2015, the annual income available from a pension was capped. However, the Pension Freedom rules now give those people over the age of 55 unlimited access to their pension.

Used sensibly, these freedoms can make early retirement a realistic possibility for many more people, allowing you to take larger amounts from your pension in the early years of retirement and then reduce the income you are taking to a more sustainable level when your State Pension kicks in.

In many ways your private or workplace pension acts as a bridge, between your preferred retirement date and the State Pension Age. Of course, this isn’t without risk and care needs to be taken not to withdraw too much capital too early, causing financial hardship later in life for you or your partner / spouse.

4. Manage outgoings

We aren’t talking about your monthly direct debits here; although it’s never a bad idea to review your spending and make cuts where possible.

No, we are referring to two large potential drains on your finances; debt and children!

Repaying debt, before you retire, will reduce your outgoings and help make early retirement more achievable. However, in these days of very low interest rates even this isn’t as straightforward as it sounds; which is why financial advice is so important. More of that in a moment.

The Prudential’s research found that around one in three people planning to retire early in 2017 are providing financial assistance to family members; mostly, although not exclusively, their children. Helping your children meet the cost of university or to get on the housing ladder is second nature for most people, but should you do it at the expense of your own retirement goals?

Only you can answer that question.

However, if you believe you may want to provide financial assistance to your children, careful planning, starting as far in advance as possible, is essential to ensure you have the capital necessary and sufficient left over to provide the income you need in retirement.

5. Take advice

There’s growing evidence that those people who take financial advice are more likely to be able to retire early, on their terms, or with higher incomes.

The Prudential research found that people retiring early were more likely to have sought financial advice (70%) than those who wait until their retirement age (57%).

Furthermore, additional research has shown that those people who take financial advice can be up to £43,245 better off when they retire. (Source: Royal London / International Longevity Centre)

Working with a financial planner will help achieve the other four elements we’ve identified as being essential to retiring early. A financial planner or adviser will:

  • Provide and update the strategy required to plan for an early retirement
  • Show you how to maximise the help that’s on offer, particularly in relation to tax-relief
  • Demonstrate how the Pension Freedom rules can be used to your advantage
  • Help you plan ahead so, where appropriate, debt is repaid before you retire and you have sufficient capital to provide any financial assistance necessary to children or other members of your family without jeopardising your own financial future

If the thought of early retirement appeals, we are here to help you achieve your aspirations.

Call us on 0116 240 7070 or email