Retirement checklist: preparing for pension drawdown

Approaching retirement is an exciting life milestone — after all, it’s finally time to kick back, relax, and hopefully tick off some bucket list items. But making sure you’re prepared for pension drawdown is an essential first step to making the most of your hard-earned retirement fund (and can help you decide how to prioritise your big plans).

Our retirement checklist will guide you through the key steps to take as you get ready for this next chapter. From understanding pension terminology to nominating beneficiaries, we’ve got you covered.

Jump straight to:

1. Check you'll have enough through retirement
2. Brush up on pension terminology
3. Get your documentation ready
4. Nominate your beneficiaries
5. Speak to a Specialist Financial Adviser

1. Check you'll have enough through retirement

Probably the most critical step in your retirement planning is making sure you’ll have enough to cover your expenses throughout the whole of your retirement. This is particularly important given increasing life expectancies (currently 87 years old for men, 90 for women^[1]), which may require your pension savings to last longer than you initially anticipated.

Take a look at the PLSA’s Retirement Living Standards to understand what a comfortable retirement might cost, depending on your lifestyle. Their data is a helpful starting point to gauge how much you’ll need, but it’s worth noting their expectations that the individual has paid off a mortgage by the time they retire (naturally, not everyone will have achieved this).

You can also use Wealthify’s Pension Calculator to work out whether your savings are on track.

Remember, it isn’t just about covering your day-to-day expenses — you’ll also need to consider:

• Unexpected costs;
• Inflation;
• The possibility of needing to pay for care in later life.

2. Brush up on pension terminology

Pensions can be complicated, and the terminology often makes it harder to navigate your options.

Having a clear understanding of the language pension providers use can help you feel more confident when discussing your pension drawdown options and in turn, giving them clear directions on what you want to do with your pension pot.

For example, knowing the difference between flexi-access drawdown and an annuity plan can influence your decisions.

So, before you contact your pension provider, take some time to understand common terms like ‘Pension Commencement Lump Sum (PCLS)’ and ‘Uncrystallised Fund Pension Lump Sums (UFPLS)’.

If you need a detailed overview, check out Wealthify’s blog on pension drawdown rules, which explains the options we offer and how they might suit different financial goals.

3. Get your documentation ready

Preparing the necessary paperwork ahead of time could also make the pension drawdown process much smoother.

Your provider will likely require specific documents or personal information, so it’s worth getting everything in order before you begin.

Particularly if you've already taken a withdrawal

If you’ve previously taken a withdrawal from your pension, be aware that your provider may ask for details of how much of your lifetime allowance has already been used. Keeping track of this information will help avoid delays in processing your request.

Trace old pensions

As part of your retirement checklist, this might be a good time for you to track down any old or forgotten pension pots from past jobs.

Over the course of your career, you may have accumulated multiple pension pots with different providers which could be more beneficial to you if they were combined.

Consolidating these pensions into one pot could make managing your retirement savings simpler. However, it’s important to weigh up the potential benefits and drawbacks of consolidation, such as changes to fees or loss of certain guarantees, like those with defined benefit pension plans.

Wealthify offers a pension consolidation service, which could help you streamline your savings.

Check your tax code is correct

Before you start drawing your pension, check that your tax code is accurate.

This will help you avoid being placed on an emergency tax code, which could result in overpayments or underpayments of your pension income.

HMRC’s online tax code checker is a useful tool to confirm your code: check your income tax for current year here.

4. Nominate your beneficiaries

It’s never easy to think about what will happen to your pension when you pass away, but planning ahead can provide peace of mind for you and your loved ones.

Most pension providers allow you to nominate beneficiaries to receive the remaining funds in your pension pot. This ensures your wishes are clear, although it’s important to note that the final decision is typically at the provider’s discretion.

Making your intentions clear by nominating your chosen beneficiaries, confirming this in your will, or Letter of Wishes, could help the company make that decision.

5. Speak to a specialist Financial Adviser

Navigating the world of pensions and retirement can be daunting, and there’s no one-size-fits-all solution. Wealthify doesn’t offer financial advice, but speaking to an independent Financial Adviser with a specialist background in pensions could help you tailor your drawdown strategy and create a plan that is bespoke to your unique circumstances.

For free, impartial guidance, you could think about contacting MoneyHelper’s Pension Wise service if you're eligible (if you are 50 years old, if you’ve inherited a pension, or you need to access your pension early due to serious ill-health).

They provide advice on your options and can help you make informed decisions about your financial future:

References:

[1]: Life expectancy calculator - Office for National Statistics