Tax treatment depends on your circumstances and is subject to change
New Year’s resolutions usually focus on health, work or lifestyle. But there’s one annual habit that can pay off for decades: a quick, structured check-in on your retirement plan.
Retirement planning rarely goes wrong because of one big decision. It more often drifts off course through a series of small default choices: leaving old pensions scattered, taking money without a tax plan, or staying invested in something that no longer fits your time horizon. A simple annual review helps you stay in control.
What follows is a practical, plain English Retirement MOT you can run once a year. It’s designed for people aged 50+, but the principles apply at any age.
Tax treatment depends on your circumstances and is subject to change.
Before the checklist, it’s worth acknowledging the backdrop. The Autumn Budget confirmed that income tax thresholds will remain frozen for several more years.
What does that mean in practice once you stop working?
This is not a reason to panic. It’s a reason to plan withdrawals deliberately, rather than taking money ad hoc.
Many people no longer go from full-time work to a full stop. They gradually reduce hours, start drawing some pension income, or change work roles.
A useful first question is: what are you aiming for in the next 12–24 months?
Why does this matter? It drives everything else. How much risk you can take, how much cash or income you need and how you should draw income tax efficiently.
A normal budget is useful, but for retirement planning you need a slightly different view: what will your spending look like once income tax and tax bands start to matter more?
Start with two buckets:
Now add three retirement-specific checks:
For many households, insurance, energy, motoring costs and health-related spending don’t always move neatly with inflation. A realistic allowance here reduces the risk of drawing too much too soon.
Estimate what your more secure income might be in retirement (for many people that’s State Pension plus any guaranteed pensions/annuities). Then ask: does that baseline cover essentials, or will you need regular withdrawals/additional income to fund essentials?
With income tax thresholds frozen for several years, modest increases in pension income (or taking a larger withdrawal in one year) can push more of your income into higher-rate tax over time. The practical implication is that smoother, planned withdrawals can often be more tax-efficient than occasional large withdrawals.
A quick way to make this real is to write down two numbers:
That gap is the amount your plan needs to fund reliably without relying on guesswork or rushed withdrawals.
Workplace pensions are one of the few areas of personal finance where doing nothing can be beneficial because auto-enrolment nudges you to stay in and your employer has to contribute.
By law, minimum contributions are 8% of qualifying earnings, with the employer paying at least 3% (many employers pay more).
Two protections matter for most people:
Even at minimum levels, your employer’s contribution is money you generally only receive if you stay enrolled.
If you’re in the scheme’s default arrangement (as many people are), there is a legal charge cap of 0.75% a year on the default fund’s member-borne charges (with some excluded items such as transaction costs).
Salary sacrifice: the extra boost (uncapped until April 2029, then limited)
If your employer offers salary sacrifice, it can add another layer of value:
This NI advantage is due to change. From April 2029, the amount of employee pension contributions via salary sacrifice that is exempt from NI will be capped at £2,000 per year, although pension contributions through salary sacrifice will still normally be exempt from income tax (within the usual pension rules).
Practical takeaway: salary sacrifice can be a meaningful benefit now, but it’s sensible to review how it works for you and how it may change post-2029.
If you’ve changed jobs over your career, you may have several old workplace pensions.
Consolidating can be helpful because it can:
That said, there are exceptions, such as defined benefit (final salary) pensions and other schemes with valuable guarantees or protected features. If you are unsure, take advice before moving anything.
A simple New Year action: write down every pension you can remember (including old employers), then check where it is held, whether it is still invested, what the charges are, and whether there are any special benefits.
The biggest avoidable mistakes tend to happen at the point people first access pensions, especially when decisions are rushed.
The Financial Conduct Authority’s latest retirement income market data1 shows that in 2024/25, only 30.6% of pension plans accessed for the first time involved the saver taking regulated advice.
Whether you take advice or not, the planning sequence matters:
If you are still working (or might work again) and you take a taxable withdrawal or income from a defined contribution pension, you can trigger the Money Purchase Annual Allowance (MPAA).
The MPAA limits how much you can pay into defined contribution pensions each year and still receive tax relief. Under current rules, the standard annual allowance is £60,000 (or 100% of earnings if lower). But if you trigger the MPAA, this allowance drops to £10,000 a year, and that change is permanent.
Taking only tax-free cash typically does not trigger the MPAA, but taking taxable income usually does. This is exactly the sort of small decision, big knock-on effect that a New Year review is designed to catch.
This is not about chasing last year’s best-performing fund. It is about whether your strategy still fits:
As you approach retirement, it becomes more important to think in time buckets: money needed soon should not usually be exposed to the same ups and downs as money intended for later life.
A New Year retirement check-in does not need to be complicated. The aim is to prevent avoidable mistakes, keep your plan aligned to your life, and ensure you are not missing valuable benefits, particularly employer pension contributions and the compounding effect of tax relief.
The strongest reason to take regulated financial advice is not investment picking, it is planning: modelling different retirement dates, designing a sustainable withdrawal strategy, coordinating pensions and ISAs, minimising avoidable tax, and helping you avoid irreversible decisions (including accidental triggers like the MPAA). The Financial Conduct Authority’s data continues to show that most people still access pensions without advice, yet the financial consequences of getting it wrong can be long-lasting.
If you’re reading this and thinking “I know I should review things, but I’m not sure where to start,” that’s exactly where good advice adds value.
Pension Access can help you turn a set of pension pots, ISAs and assumptions into a clear, practical plan built around your goals and updated as life changes. In particular, we can help you to do the following:
How much you can take from where, and when, designed to last and to remain flexible if circumstances change.
For example, structuring withdrawals to reduce the risk of unnecessary higher-rate tax in a single year and helping you understand what will be taxable and what won’t.
These Include avoiding accidental triggers such as the Money Purchase Annual Allowance (MPAA) if you are still working or may contribute to your pension again.
Helping you identify when combining pensions is sensible and when it may not be because of guarantees, protected features, or defined benefit benefits.
Ensuring your investments still match your time horizon, withdrawal plan and capacity for loss, particularly as you move from saving to drawing income.
Retirement is rarely a single event. A structured annual review helps keep your plan aligned to markets, tax rules and your own circumstances.
If you would like a structured review of your position and a written retirement plan you can actually use, we can talk you through the next steps and whether regulated advice is right for you.
1 FCA Retirement Income Market Data 2024/25
We can help you to make the best possible decisions when it comes to your pension.
Taking pension money early is not right for everyone as it will leave you worse off in retirement. Also, tax treatment depends on your circumstances and is subject to change. That’s why it makes sense to get help from a regulated specialist.
