Planning for retirement

Planning for retirement helps you take control of your future. By setting goals early and making smart financial choices, you can enjoy greater peace of mind and security later in life.

Financial journalist and presenter of BBC Radio 4's Moneybox, Paul Lewis, gives his tips on how to plan for retirement - covering topics such as pensions, tax, annuities, wills and debt.

Financial planning is really just arithmetic. Write down your income, your expenditure, what you really have to spend.

Then look at what you might expect, your state pension and any other pension you've been paying into. Then see how they balance.

If they don't, then you're going to have to cut your expenditure or find a way to increase your income once your reach retirement.

It might take a while to do a bit of phoning round or looking on the internet, but it's fairly simple to find information yourself and definitely worth finding out the basics.

The Money Advice Service has lots of useful information

Making a will before retiring

Paul Lewis explains why it's vital to make a will when planning retirement. Here are the key points from the video:

• Making a will is important if you care about what happens to your money and belongings after you die.

• Most people want their assets to benefit younger relatives or charities.

• Without a will, the law decides who inherits your estate—and that might not match your wishes.

• Assets don’t automatically go to your spouse in every case, and if you're unmarried, they won’t go to your partner.

• Inheritance follows bloodlines if no will is in place.

• Wills become invalid upon remarriage, so you must create a new will if you marry again.

Why you should make a will

Annuities in retirement

Paul Lewis explains what an annuity is and how to find the right one. Here are Paul's key points about annuities: 

• An annuity is an income for life—you convert your pension pot into a guaranteed income when you retire.

• Annuities are sold by insurance companies, who take your pension pot and pay you a regular income for the rest of your life.

• You should shop around on the open market to find the best annuity deal.

• Health and lifestyle factors matter—if you smoke or have health issues, you may get a higher income due to shorter life expectancy.

• You can choose to provide for a spouse or partner, but this reduces your income initially.

• Inflation-proof annuities are available, but they start at a much lower income—possibly half—compared to standard annuities.

• You may need to live around 20 years to benefit financially from an inflation-linked annuity.

• Advice is important, so speak to specialists when you’re ready to make the decision.

Deciding whether to buy an annuity

Dealing with debt ahead of retirement

Why getting rid of your debt is important before you retire. Paul's key point's on debt are below:

• Many working people have debt, such as credit cards, loans, or mortgages.

• It's important to clear debt before retiring, as your income typically drops in retirement.

• Plan ahead—calculate how much you need to pay off over the years leading up to retirement.

• Paying interest is “dead money”, especially when living on a reduced income.

• Eliminating debt is a key part of pre-retirement planning.

Get debt advice

Income tax in retirement

Why you need to talk to the taxman when you retire, so you don't miss out. Here are Paul's key points around tax in retirement:

• Check your tax carefully when you stop working or if you have more than one source of income.

• Tax is collected through PAYE (Pay As You Earn) using tax codes, which aren't always accurate.

• Unusual income situations—like having gaps in work, multiple jobs, pensions, or a mix—can lead to incorrect tax.

• Tax errors are common at certain ages, like 65 or 75, when your tax-free allowance may change.

• The state pension is taxable, but it’s paid without tax deducted, so it affects your tax code.

• Always check your annual tax code to make sure it’s correct—look at the numbers and see if they make sense.

• If in doubt, call HMRC or consider hiring an accountant—it might cost a little, but could save you much more.

More information about Income tax

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