Paving the road to retirement: how to financially prepare for a seamless transition

Lily Megson from My Pension Expert outlines your pension options if you are approaching the transition to retirement.

Keyboard, mouse and pad with retirement planning written in it


The transition into retirement marks a radical shift in a person’s life. Entering this phase brings a fresh set of priorities, particularly when it comes to finances. While every view on retirement is different, with some eagerly in anticipation and others hesitant to exit the working world, the fact remains – most people reach retirement eventually, making it crucial, therefore, to assess financial preparedness – a task that can prove more challenging than it sounds.

Research from the Pensions and Lifetime Association indicates that a staggering 77% of savers are uncertain about the income required to secure their desired lifestyle in retirement, and just 20% express confidence in their current savings.

There’s also a financial aspect to take into account. With welcome advancements in healthcare extending lifespans, the possibility of outlasting retirement savings is very real – so how can we ensure our finances will provide adequate support?

Looking at longevity

Dreams of retirement may vary, but undoubtedly, after years of working hard and saving diligently, people deserve to spend that time however they wish. Despite this, data from the Institute for Fiscal Studies (IFS) reveals that 90% of middle-earning private sector employees fall short of saving the recommended 15% of their income as suggested by the Pensions Commission.

At the core of these financial challenges is the issue of longevity risk – the prospect of outliving sources of retirement income, including investments, savings, pensions and annuities. With the Office for National Statistics (ONS) predicting an increase in life expectancies, those currently aged 65 are anticipated to live another 20 years, amplifying the need for robust financial planning to ensure income sustains over an extended period.

Navigating this new transition

Starting preparation for retirement involves a thorough reflection by planners on their current situation. Making an inventory of pension savings and investments helps to quickly assess current wealth – any outstanding debt and identifying potentially lost pension pots ought to be considered too.

Deciding upon a timeline for the transition and defining their desired retirement lifestyle are the next vital steps to understand how far savings in their current trajectory can support retirement goals.

It is worth remembering that the transition won’t be one-size-fits-all, and planners can choose between a phased approach or immediate retirement, depending on which one suits their strategy the most. What is most important is the establishment of a personalised financial strategy that is well aligned with individual goals and risk tolerance.

Picking a foolproof strategy and the right financial products

A robust strategy will involve matching financial products with goals, financial position and a vision for retirement.

For example, in times of fiscal uncertainty, as seen over the past few years, many retirees have been attracted to annuities, which offer the stability of a guaranteed income for life or a set period. While high annuity rates can be appealing, their inflexibility requires commitment regardless of market shifts, losing out on the benefits offered by more dynamic products.

Some retirees may, therefore, find flexible-access drawdowns more suitable; although vulnerable to market fluctuations, they offer growth potential alongside economic recovery, providing flexibility to navigate financial uncertainty.

But this is a highly personal decision – which is why seeking independent financial advice is so vital.

Financial advisers help develop a tailored retirement plan, considering future goals, pension savings, and assets, offering individualised recommendations to secure the best retirement outcome.

Ultimately, preparing for a fulfilling retirement necessitates making a solid plan and informed choices, considering both financial complexities and the potential for a longer retirement. From opting for annuities or flexible-access drawdowns to another source of retirement income, many options are available to savers.

*Lily Megson is the Policy Director of My Pension Expert, an advised retirement income specialist (rated number one on Trustpilot). Founded in 2010, FCA-regulated My Pension Expert specialises in providing independent advice to UK consumers about their pension plans – it arranges millions of pounds worth of retirement income options each week. 

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