“Planning how to pay for retirement is one of the biggest financial decisions people make. It is important that employees are supported to understand all the options available, make informed decisions and avoid making expensive mistakes with their hard-earned savings,” says Jonathan Watts-Lay, Director, WEALTH at work, a leading financial wellbeing, retirement and workplace savings specialist.
To help with this, WEALTH at work has created some top tips below to share with employees who are thinking about retiring in 2026.
WEALTH at work’s top tips for those retiring in 2026
1. Work out costs in retirement
When it comes to retiring it is crucial to work out how much money a person will need in retirement to meet day-to-day living expenses such as household bills as well as discretionary expenditures including holidays and hobbies.
According to the Pensions UK[1], estimated annual spending in retirement for a single person will be about £13,400 a year if they have a minimum standard of living (this would cover all a retiree’s needs plus enough for some leisure activities such as a week’s holiday in the UK and eating out occasionally); £31,700 a year for a moderate standard of living (one foreign holiday a year and more frequent eating out); and £43,900 a year for a comfortable standard of living (this would cover all a retiree’s needs plus two foreign holidays a year and some luxuries such as regular beauty treatments). For couples, it’s £21,600, £43,900 and £60,600, respectively.
2. Track down all pensions At least 3.3 million pension pots are considered to be ‘lost’ or forgotten, with each pot being worth an average of £9,500[1]. Whilst auto-enrolment has successfully increased pension participation, it has also led to people accumulating multiple small pension pots as they move between jobs. In fact, there are now 13 million of these small pots, worth £1,000 or less, with the number increasing by around one million a year. This is making managing retirement savings more complex.
There are ways to locate lost pensions including using the Government’s Pension Tracing Service (www.gov.uk/find-pension-contact-details). If the company no longer exists contact Companies House
(https://www.gov.uk/government/organisations/companies-house), or charities can be found using the charity register (https://www.gov.uk/find-charity-information). People should ask for up-to-date statements, so it is clear how much pensions are worth. Those with several pots might also want to consider consolidating them. Some workplaces offer access to pension consolidation services to help with this.
3. Calculate all sources of retirement income
Many people assume their pension will be their only source of income in retirement but that may not be the case. Other assets, such as ISAs, personal savings accounts and other investments can all contribute to financial security later in life.
Taking time to calculate the combined value of these resources gives a clearer picture of retirement income and helps people plan more effectively. It’s important not to overlook smaller savings pots or forgotten accounts - they can make a big difference when added together.
4. Check state pension entitlement
Some people may not realise they need at least 35 qualifying years of National Insurance (NI) contributions to receive the full new State Pension. This can be difficult for those who’ve taken career breaks or time off for childcare or caring responsibilities.
Those who have gaps in their NI record can still boost their pension by buying voluntary NI credits. For the 2025/26 tax year, the cost is £17.75 per week (around £923 for a full year). Individuals can pay for the previous six tax years, so for the 2025/26 tax year any gaps from 2019/20 onwards can be covered.
Those who are approaching retirement can make an enquiry to find out what they are going to receive by requesting a State Pension statement using a form called a BR19, which is available online or by calling the government helpline on 0800 731 0469. Alternatively, those that have a Government Gateway account can access the details online.
5. Consider how to access pension income
It’s important for people to think about how they plan to take their pension savings to generate an income in retirement. For those with defined benefit (DB) pensions, retirement income is usually based on a rate set by the scheme (the accrual rate) and typically is a percentage or fraction of their salary for each year they have been an active member of the pension. There is usually a set retirement age such as someone’s 60th or 65th birthday; however, they may be able to receive benefits earlier or later than this.
Defined contribution (DC) pensions can be accessed from age 55 rising to 57 from April 2028, and people will need to decide how they want to do this.
Options include taking income drawdown (where the pension money is still invested but cash is taken as and when needed), buying an annuity (which is a fixed sum of money paid to someone each year), taking it as a cash lump sum, or a combination of these options.
6. Check if retirement is affordable
Another step is working out how much pension savings would be needed to generate a gross income that will meet the required spending needs in retirement. For a couple to cover the costs of a moderate living standard (i.e. £43,900 a year[1]), Which?[2] calculated that they would need £381,800 in a DC pension pot if taking income drawdown, and £317,700 for an annuity. These figures assume the individual is also in receipt of the full State Pension.
For a single person to reach a moderate living standard (i.e. £31,700 a year[1]), they would need £375,600 if taking income drawdown, or £312,600 if they purchase an annuity.
People who are single may need a larger retirement pot compared to those in a couple. Couples benefit from two sets of tax allowances and potentially two state pensions, whereas a single person only has one tax allowance and one state pension. In addition, living costs can feel higher when you’re on your own, as expenses like housing and utilities aren’t shared.
If someone is worried that they haven’t saved enough, it may be worth delaying retirement or continue working part-time. This would enable them to make more pension contributions, and they would be able to take advantage of tax relief and employer contributions for longer to build up their savings.
7. Shop around
Before committing to any retirement product, it’s essential to shop around, as charges and rates can vary widely between providers. For income drawdown, compare providers carefully. -Some charge flat fees while others apply tiered percentage charges, which can make a big difference to overall costs.
Those who are considering an annuity should look for a provider that offers the features they need, such as inflation protection or a guaranteed payment period, and make sure they’re getting a competitive rate. Annuity rates can vary significantly and should reflect any health conditions someone has, which could qualify them for an enhanced rate.
By comparing options and seeking investment advice, people can help ensure their retirement income goes further.
8. Don’t pay unnecessary tax
Unfortunately, some people don’t realise that only the first 25% (up to a maximum of £268,275 for most people) of a DC pension is tax-free, and the remaining 75% is taxed at the same rates as earned income. So, if they decide to take their pension as a cash lump sum, they may unwittingly become a higher rate taxpayer. It may be better for them to take smaller amounts each year from their pension, keeping within their tax bracket, and then top it up with withdrawals from other savings. With careful planning, it may be possible to avoid paying unnecessary taxes which means more income in retirement.
9. Beware of scams
Action Fraud found that pension scam victims lost more than £17.7m in 2024[1]. Whatever someone is planning to do with their retirement savings, it’s vital they check whether the company that they’re planning to use is authorised and regulated by the Financial Conduct Authority (FCA) https://register.fca.org.uk/. They can also visit the FCA’s ScamSmart website which includes a warning list of companies operating without authorisation or running scams www.fca.org.uk/scamsmart.
10. Don’t go it alone
It is vital that individuals fully understand their retirement options and are able to choose what is right for them. Getting financial education, one-to-one guidance and investment advice at retirement can really help ensure a person understands all aspects of their retirement to retire confidently.
Many workplaces are a great source of support. In fact, 92% of employers reported that they either currently offer, or plan to offer, financial education for older employees. Not only this but offering investment advice specific to retirement is set to almost double from 28% currently offering it, to 54% in the future.
Jonathan Watts-Lay, Director, WEALTH at work, comments,
“We spend many years saving for our retirement and deciding how to manage this money is one of the biggest financial decisions people make. It is heartbreaking when people make mistakes with their hard-earned savings which could have been so easily avoided.”
He adds; “This is why many employers and trustees are now working together with financial wellbeing and retirement specialists to help individuals understand their retirement options and help them make informed decisions. This includes offering financial education, guidance, and investment advice, as well as access to a pension consolidation service. However, before proceeding it’s essential to carry out due diligence on any providers, such as ensuring that they are workplace specialists. Checks on advice firms should cover areas such as qualifications of advisers, the regulatory record of the firm, compliance processes and the pricing structure.
Ultimately, empowering employees with access to appropriate support at the right time can improve financial capability and resilience which should result in better retirement outcomes for all.”
[1] https://www.retirementlivingstandards.org.uk/
[3] https://www.retirementlivingstandards.org.uk/
[4] https://www.which.co.uk/money/pensions-and-retirement/planning-your-retirement/how-much-will-you-need-to-retire-aNmlv7V7sVe9 - Drawdown figures are based on a saver withdrawing all their money over 20 years from age 65, and assume investment growth at 3%, inflation at 1% and charges of 0.75%.
[5] https://www.retirementlivingstandards.org.uk/
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