Are You Retirement Ready? The Five Questions Every Savvy Saver Should Ask

The start of a new year is often when we take stock of where we are and where we are heading. For those approaching retirement, or already there, January 2026 presents an opportune moment to review your financial position with fresh eyes.

The retirement landscape has shifted considerably in recent years. With State Pension age rising to 67 from May 2026, pension allowances at historically high levels (£60,000 annually), and the lifetime allowance abolished in 2024, the rules have changed significantly.

Understanding where you stand has never been more important.

If you are serious about optimising your retirement outcome, these five questions will help you assess whether your strategy is on track.

1. Do You Know Your Full Pension Position?

Most people approaching retirement have accumulated multiple pensions throughout their careers. Former workplace schemes, personal pensions, stakeholder pensions, and legacy plans can easily total four, five, or more separate arrangements.

The critical question is not how many pensions you have, but whether you understand the complete picture. What is the total value across all schemes? What are the ongoing charges? Are there any valuable guaranteed benefits or protections that consolidation might forfeit?

With the full new State Pension now paying £12,548 annually from April 2026, you need to know precisely what additional income your private pensions will provide. The Retirement Living Standards suggest a single person requires £14,400 annually just for a minimum lifestyle. A moderate lifestyle requires £31,300, and a comfortable retirement needs £43,100.

The State Pension covers less than a third of a comfortable retirement. Your private pension provision must bridge that substantial gap.

2. Are You Maximising Your Pension Contributions?

For 2025/26, the pension annual allowance remains at £60,000. This represents the maximum amount you can contribute across all pensions whilst receiving full tax relief.

For higher earners, the mathematics is compelling. A £60,000 contribution effectively costs a higher-rate taxpayer £36,000 after tax relief, or £33,000 for additional-rate taxpayers. That is immediate tax relief of 40% or 45%, with all subsequent growth sheltered from further taxation.

If you have not maximised your allowance in recent years, carry forward rules allow you to use unused allowances from the previous three tax years. For business owners with fluctuating income, this can enable contributions exceeding £200,000 in a single year whilst still obtaining full tax relief.

However, high earners with threshold income exceeding £200,000 and adjusted income over £260,000 face the tapered annual allowance, which reduces the standard £60,000 by £1 for every £2 of adjusted income over £260,000, potentially down to just £10,000.

If you fall into this category, strategic pension planning becomes essential to avoid tax charges whilst maximising retirement savings.

3. Have You Assessed Your Retirement Timeline?

When you plan to access your pension significantly affects your strategy. The minimum access age is currently 57 (having increased from 55 in 2028), but many delay until State Pension age or beyond.

Your timeline determines appropriate investment risk. If retirement is 15 years away, you can typically afford greater exposure to equities for long-term growth. If you plan to access funds within five years, excessive volatility becomes problematic.

Additionally, accessing pension funds triggers the Money Purchase Annual Allowance, restricting future defined contribution pension savings to just £10,000 annually. If you intend to continue earning and contributing after initial retirement, this becomes a critical consideration.

Understanding your timeline also affects tax efficiency. Phased retirement, where you gradually draw down pension whilst continuing to work and contribute, requires careful structuring to avoid unnecessary tax charges whilst maintaining financial flexibility.

4. Are Your Investments Actually Aligned With Your Goals?

Many people remain in default investment funds chosen when they first enrolled, often decades ago. Default funds typically become increasingly conservative as you approach retirement, which may or may not align with your actual requirements.

If you have substantial other assets, you might afford greater pension risk for enhanced growth potential. Conversely, if your pension represents your primary retirement asset, preservation may trump growth beyond a certain point.

Fund charges also warrant scrutiny. A difference of 0.5% in annual charges compounds substantially over decades. On a £200,000 pension over 20 years, that 0.5% difference could cost over £20,000 in reduced final value.

With volatility across global markets in recent years, reviewing whether your current strategy remains appropriate for your circumstances and timeline is essential.

5. Have You Optimised For Tax Efficiency Beyond Contributions?

Tax planning extends well beyond maximising pension contributions. How you eventually draw income significantly affects your net retirement income.

With the 25% tax-free lump sum allowance now capped at £268,275 (the Lump Sum Allowance introduced when lifetime allowance was abolished), strategic planning around when and how to use this allowance becomes important.

For those with substantial pension assets, inheritance tax planning warrants consideration. Pensions sit outside your estate for inheritance tax purposes, making them efficient vehicles for intergenerational wealth transfer, particularly given recent changes allowing beneficiaries to inherit pensions with favourable tax treatment in many circumstances.

For business owners, the interaction between director's salary, dividends, and employer pension contributions creates opportunities for significantly enhanced tax efficiency that employed individuals cannot access.

Taking Action

Retirement planning is not a one-time exercise. Economic conditions change, legislation evolves, and your personal circumstances shift. What was optimal five years ago may no longer be appropriate today.

The beginning of a new year offers a natural opportunity to review your position. Are you on track to achieve the retirement you want? Are there strategies you are not utilising? Could changes to your current approach enhance your eventual outcome?

If you cannot answer the five questions above with confidence, or if you would like an objective assessment of whether your current strategy is optimised for your circumstances, we can help.

Book a Free Consultation with Gavin here