How careful financial planning could help you avoid retirement regret and achieve your dream lifestyle

Category: News

Your retirement is an opportunity to reap the rewards of years of hard work and spend more time with the people you love, doing what you enjoy most.

However, building the retirement lifestyle of your dreams requires careful financial planning throughout your working life and beyond. Failing to do this could lead to you falling short of your expectations in retirement.

Sadly, this is a reality for many people. Indeed, research by Canada Life has revealed that 2 in 5 UK adults wish they’d approached their retirement differently.

Fortunately, the earlier you start planning and saving for your retirement, the more potential you may have to grow your wealth. In fact, there are steps you could take at any age to move you closer toward the retirement of your dreams.

Read on to find out how to avoid some of the most common retirement regrets and make the most of your savings to help you achieve the lifestyle you want.

Increasing your pension contributions while you’re working could help you build a larger pension pot

According to the Canada Life research, 1 in 5 retirees regretted not increasing their pension contributions during their working life. What’s more, 1 in 10 would have made changes to their lifestyle so that they could have saved more in their retirement fund.

Increasing your pension contributions while you’re still working is one of the most straightforward and effective ways to bolster your retirement savings.

According to research by Fidelity, increasing your contributions by as little as 1% could add as much as £37,000 to your pension pot, even if you take a career break – for example, to start a family.

The earlier you start to save into a pension, the more time it has to potentially grow. So, it’s important to consider increasing your contributions as early in your working life as possible.

The Fidelity figures revealed that a woman who increases her pension contributions by 1% at the age of 25 and takes a two-year career break at 31, could boost her pension pot by £10,000 more than a woman paying the minimum 8% without a career break.

What’s more, the same 1% increase could result in a pension pot worth over £35,000 more than that of a woman who pays the minimum 8% and takes a two-year career break.

Indeed, saving into your pension is one of the most tax-efficient ways to save for retirement.

This is because the government provides generous tax relief on the contributions you and your employer make, up to your Annual Allowance. In 2023/24, this stands at £60,000 or 100% of your earnings, whichever is lower.

However, your Annual Allowance may be lower if your income exceeds certain thresholds, or if you have already flexibly accessed your pension.

How much tax relief you receive depends on your marginal rate of Income Tax. Basic-rate taxpayers receive 20% pension tax relief, so in effect, a £100 contribution only “costs” you £80. Higher- and additional-rate taxpayers can claim an additional 20 or 25% respectively.

So, by increasing your pension contributions, you could accumulate a larger retirement fund that allows you to live a more comfortable lifestyle for longer. You might even choose to retire earlier, giving you more time to achieve your goals.

Developing a strong investment portfolio could bolster your retirement savings over the long term

Rather than setting money aside in your pension, you might be tempted to rely on cash savings for your retirement fund, especially when interest rates are favourable.

Cash savings may feel familiar and low risk compared to investing, which many perceive as complicated and high risk. Indeed, Money Marketing has revealed that 22% of UK adults are prioritising cash savings due to higher interest rates, and 19% said they don’t invest as they’re not confident about how to do so.

However, while it may be sensible to hold some cash for short-term needs and emergencies, investing over the long term has the potential to deliver higher returns.

This is because inflation is likely to erode the real-terms value of cash over time, even if it remains at modest levels.

In contrast, a historic review of 148 years of market data by Schroders found that the longer a person held their investment, the lower the chances were that they would lose money. For example, someone who sold their investment after one month might have lost 39.3% of the time, compared to just 0.1% if they held on to that investment for 20 years.

While past performance is not a guarantee of future performance, this demonstrates the potential value of building a diversified investment portfolio as part of your long-term financial plan.

Investing provides the potential to bolster your retirement savings, allowing you to enjoy the lifestyle you desire when the time comes to leave work behind.

If you lack confidence in investing, a financial planner can help you balance risk in your portfolio and align your investment strategies with your unique retirement goals. They can also devise a decumulation strategy – where you begin liquidating assets to fund your retirement – to build a sustainable and tax-efficient income.

Withdrawing funds from your pension tax-efficiently could allow you to make the most of your retirement savings

The need for effective financial planning to make the most of your savings doesn’t disappear when you retire.

Planning how to build a sustainable income during retirement may be one of the most important considerations when working out how to fund the retirement of your dreams.

In fact, Money Marketing has reported that a fifth of retirees regret taking too much too soon from their pensions and wish they had taken less from their savings in cash up front.

Indeed, while you can typically take 25% from your pension as a tax-free cash sum when you retire, this may not be the most sustainable approach.

Instead, withdrawing your funds gradually over a longer period could allow you to build a tax-efficient income over time. What’s more, any money you leave in your pension pot could continue to deliver investment returns.

Additionally, if you start to make flexible withdrawals from your pension, you could trigger the Money Purchase Annual Allowance which would limit tax relief on any future contributions to £10,000 (2024/25).

So, before withdrawing from your pension, it’s worth considering whether you need these funds immediately. If you have other cash and investments to draw on, you could leave your pension invested for longer, allowing it more time to potentially grow.

Additionally, a pension is not usually considered part of your estate for Inheritance Tax purposes. So, leaving your pension to a loved one could be a tax-efficient way to pass on your wealth.

Consulting a financial planner before you retire could help you avoid retirement regrets

Of course, one of the simplest ways to reduce the risk of retirement regrets is to consult a financial professional to help you plan for the retirement you want.

A financial planner can help you understand your retirement income needs and develop a bespoke plan that aligns your savings and investment strategies with your long-term lifestyle goals. They can also support you to devise a sustainable, tax-efficient income that will last the length of your retirement.

With many people saying they have regrets about how they prepared for retirement, it’s perhaps unsurprising that, according to MoneyAge, half of retirees didn’t check or seek help to see if they could afford to retire before doing so.

Working with a professional to develop a clear understanding of how far your income will stretch and the tax implications of making withdrawals from your pension could help you make decisions such as when to retire. In doing so, you might avoid regrets such as “I wish I’d retired later” or “If only I had started planning sooner”.

Get in touch

If you’d like to know more about creating a financial plan for achieving your desired retirement lifestyle, we can help.

Please contact us by email at or call 020 8941 9779 to see how we can help you.

Please note

This article is for general information only and does not constitute advice. The information is aimed at retail clients only.

Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.

A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance.

The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts.

Workplace pensions are regulated by The Pension Regulator.

The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.

Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.