Pensions are one of the most powerful and tax-efficient tools for building long-term wealth, yet many people underestimate their value or leave planning too late. Starting early, contributing regularly, and reviewing your pension strategy over time – including consolidation and investment choices – are key to a comfortable retirement. A financial planner can help you navigate the pension system, cut through the jargon, and ensure your pension fits into a broader financial plan that evolves with your life.
The truth is that a pension is still one of the most powerful tools for securing your financial future. It deserves a central place in your long-term plan – a key part of how you build and protect your wealth.
Why you should be prioritising your pension
Over the years, pensions have lost some of their shine. Auto-enrolment has helped more people start saving, but that doesn’t always mean people feel engaged or confident.
The system can feel confusing and for younger savers juggling the cost of living, mortgages or childcare, retirement can seem too far away to worry about. Some people also assume the State Pension will be enough, even though for many people, it barely covers more than the basics.
At the same time, more people are worried they won’t have enough to retire comfortably. According to research1, one in seven retirees has returned to work because their pension fund wasn’t enough to support their lifestyle. The analysis suggests income-related factors are one of the main reasons why people are re-entering the workforce, with just over a third (34%) finding their living costs have increased, while 27% admit their pension is not enough to live on. That’s not a position anyone wants to be in, but with the right advice and a bit of forward planning, it’s usually avoidable.
Why pensions are powerful for building wealth
Pensions come with some unique advantages that are hard to beat – especially when it comes to growing your money over time.
One of the biggest benefits is that the government helps you save by adding money to your pension when you make contributions. For example, if you’re a basic-rate taxpayer and you put in £80, the government adds £20, so £100 goes into your pension. If you pay a higher rate of tax, you could get back even more through your tax return – which means your pension grows faster and you keep more of your money in the long run.
If you’re working, your employer will usually pay into your pension too – often adding a set amount on top of what you’re contributing. Some employers will even match what you pay in, up to a certain level. It’s essentially free money going into your future savings, and it can really add up over time.
Time is your friend
Another huge advantage is time. The sooner you start saving into a pension, the longer your money benefits from compounding; the ‘snowball’ effect of earning returns on your returns. A small monthly contribution in your 20s can grow to a substantial pot by retirement. Even if you’ve left it later, it’s still worth making the most of the years you have.
You can begin accessing your pension from age 55 (rising to 57 from 2028). At that point, you’ll have various options, including taking a lump sum, going into drawdown (where you leave the remainder invested and take income gradually), or buying an annuity (a guaranteed income for life). Each has pros and cons; we can help you explore what’s right for you.
How much pension will you need in retirement?
A common question around pensions is: how much is enough? The answer depends on your goals, lifestyle and plans for later life. There are useful benchmarks to help you work it out.
The Retirement Living Standards, developed by the Pensions and Lifetime Savings Association, are a useful guide. According to the latest figures, a single person needs around £13,400 a year for a minimum standard of living in retirement, which covers essentials (£21,600 for a couple). For a moderate lifestyle, including things like a yearly holiday and dining out, the figure rises to about £31,700 for a single person and £43,900 for a couple. For a more comfortable retirement, with luxuries such as regular overseas travel, a single person would need around £43,900 and a couple £60,600. These figures assume the full State Pension entitlement is being received. Understanding the numbers helps you set a target. From there, it becomes easier to build a strategy that supports the retirement you want.
Avoiding common mistakes
Pensions are powerful, but it’s easy to fall into a few traps. The first is starting too late. Delaying contributions can have a big impact, as you miss out on years of compounding and employer contributions. It’s never too late to start, but the earlier, the better. Another mistake is underestimating how much you’ll need. Research shows many people overestimate what the State Pension will provide or assume their workplace pension will be enough without checking. It’s essential to do the maths and regularly review your plan.
Don’t lose track of pensions
Neglecting to consolidate old pensions is also common. If you’ve worked for several employers, you may have multiple pension pots in different places. Consolidating them can make them easier to manage and may reduce fees, but this isn’t always the right choice, especially if your pension has guarantees or defined benefits. A financial planner can review your existing pensions and help you make the right decision.
Another issue is being too passive. Many people leave their pension in the default investment fund offered by their workplace pension, which may not match their goals or risk appetite. Others forget to increase contributions as their earnings rise. Reviewing your pension investment choices and contribution levels regularly can help keep your plan on track.
There are other pitfalls to watch out for. Always name a pension beneficiary, so your pension goes to the right person after you die. Unspent pensions are expected to become liable to Inheritance Tax from 2027; we’re expecting more guidance soon and will help you navigate the changes as we know more. You should also be careful about taking out too much too soon. Accessing your pension can feel like a windfall, but spending a large lump sum early on can leave you short later, it’s what some call the ‘lottery effect.’ Pensions are designed to last throughout retirement, so withdrawals should be part of a careful plan.
Helping you to make the most of your pension
The good news? Pensions don’t have to be complicated. A financial planner can help you take practical steps to get your pension working harder for you. That might start with tracking down old pension pots and reviewing whether they should be consolidated. It could mean checking how much you’re contributing and whether that matches with your retirement goals. It might mean checking whether your investments still suit your current situation and how comfortable you are with risk.
Importantly, your pension should fit into your wider financial plan. That includes things like your other investments, your mortgage, how much tax you’re paying, and your financial goals, all of which can change over time. Regular reviews, not just in the run-up to retirement, can make sure your pension keeps pace with life changes. Plus, if the jargon associated with pensions puts you off, we’ll cut through it. Terms like annuity, drawdown, tapered Annual Allowance and Lifetime Allowance charge might sound intimidating, but they don’t have to be. We’ll explain what they mean in plain English, so you can make confident, informed choices.
Look after your future by getting your pension sorted
It’s easy to put pension planning on the back burner. Life gets busy, priorities shift and retirement can seem like a long way off. The truth is, the sooner you take control of your pension, the more choices you’ll have in the future. Time to review your pensions, check your retirement goals, or simply understand how it all works? Get in touch. We’ll have a straightforward conversation about your options. No jargon. No pressure. Just clarity, confidence and a plan that works for you.
1Standard Life, 2025
The value of investments can go down as well as up and you may not get back the full amount you invested. The past is not a guide to future performance and past performance may not necessarily be repeated. The Financial Conduct Authority (FCA) does not regulate Will writing, tax and trust advice and certain forms of estate planning.
