Saving for Retirement in Your 50s

How to start saving for retirement at 50: Three practical steps

Saving money for retirement in your 50s requires strategic planning and making informed decisions. Here are some tips to help make saving for retirement in your 50s a smoother, simpler and stress-free experience.

1. Review your investments

Regularly reviewing your pension investments can help ensure they match your risk tolerance and retirement goals.

It is also important to check that the funds in which you are invested in are performing well and that you are not paying excessive fees. Higher fees means lower returns, which over time will erode the value of your pension.

2. Consolidating pensions

If you have multiple pension pots, combining them into a single plan can simplify management and potentially reduce fees. Seek professional advice to understand the benefits and implications of pension consolidation.

3. Seek financial advice

Consulting with a financial adviser can give you personalised pension advice on maximising your retirement savings.

“Tailored advice can make a big difference in ensuring your pension lasts throughout your retirement while meeting your financial needs,” says Tim Stevenson, a Pension Adviser at Hilltop Financial Planning.

 

How much retirement savings at 50

Depending on where you get your information, you’ll see advice recommending that you should have saved 4-6 times your annual pre-retirement income by the age of 50. However, remember that this is a best-case scenario.

Use retirement calculators to estimate your savings needs based on your specific circumstances. These tools can help you determine how much you need to save each month to reach your retirement goals.

 

Saving for retirement at 55 (and accessing your pension savings)

Turning 55 is a big milestone, especially when it comes to your pension options in the UK. At this age, you can typically begin taking money out of a workplace or personal pension if you wish.

As a result, you have several ways to handle and optimise your retirement savings at your disposal from this stage onwards.

Understanding these choices is key to having a comfortable and secure retirement. Let’s explore the best pension plans after 55, pension withdrawal rules in the UK, and how to make the most of your pension after retirement.

 

Pension options for over 55s

When you turn 55, you can choose from several flexible ways to manage your pension savings, including:

Lump sum withdrawals

One popular choice is the lump sum withdrawal. You can take out part of your pension savings as cash. Usually, the first 25% of your pension pot is tax-free and the rest is taxed as income. This gives you immediate funds for big expenses or investments.

Pension drawdown

Pension drawdown, or income drawdown, lets you keep your pension invested while drawing a regular income from it. This method offers more flexibility than traditional pension annuities.

It’s important to get pension drawdown advice over the age of 55 to make sure your funds last through retirement. With the right plan in place, you can maximise your returns while managing risk.

Annuities

Buying a pension annuity turns your savings into a guaranteed income for life. This option provides financial security with a steady income, no matter how the market changes. Annuities come in different types, so choose one that fits your financial goals and health status.

 

Best pension plans after 55

Choosing the best pension plan for you after the age of 55 ultimately depends on your health, lifestyle, and retirement goals. But here are some good options to consider when saving for retirement at 55 and beyond.

Personal pension plans

Personal pension plans are flexible, allowing you to keep contributing even after 55. They offer tax relief on contributions and a choice of investment funds, giving you a chance to grow your savings.

Stakeholder pensions

Stakeholder pensions are simple and affordable. They have low, clear charges and flexible contributions. This makes them the ideal choice for anyone looking for an easy-to-understand pension plan.

Self-Invested Personal Pensions (SIPPs)

Self-Invested Personal Pensions (SIPPs) give you more control over your investments. You can choose from a wide range of assets, like stocks, bonds, and commercial property.

This option is ideal for those with investment experience or those working with a financial adviser.

 

Pension withdrawal rules

Knowing the pension withdrawal rules in the UK is crucial to avoid unnecessary taxes and penalties. Here are the key points to bear in mind if you’re thinking about withdrawing money from your pension after 55:

Tax-free lump sum

Usually, you can take out 25% of your pension pot tax-free. But, taking large lump sums could affect your income tax bracket, so plan withdrawals carefully.

Flexible access

The rest of your pension (75%) can be withdrawn as you wish, either through drawdown, buying an annuity or by taking ad-hoc lump sums.

Each withdrawal is taxed as income, so spreading withdrawals over several years can help manage your tax bill.

Normal Minimum Pension Age (NMPA)

While you can access your pension from 55, the minimum pension age will rise to 57 in 2028. This highlights the need to plan ahead to ensure you have enough funds when needed.

 

Is it worth joining a pension scheme at 55?

Absolutely! Joining a pension scheme at 55 or later can still offer great benefits. Pension schemes provide tax relief on contributions and the compound growth can enhance your retirement savings.

Employer contributions can also boost your pension pot, making it worthwhile at any age.

Think about the type of pension scheme and the fees associated with it. Low-cost options like stakeholder pensions can be beneficial, especially when starting later in life.

 

Pension industry insights and statistics

The pension landscape in the UK has changed a lot in recent years, offering more flexibility than ever.
As of May 2024, 218,000 pension pots in the UK were in drawdown.

Since it was introduced in 2015, the FCA estimates that more than 615,000 people have accessed their pensions through drawdown.

According to a report by Aegon, only around a quarter (27%) of people currently in employment expect to make a “hard stop” from work when they retire.

This nuanced trend towards a more phased retirement can help to manage cash flow and ensure a smoother transition into full retirement.

 

Retirement planning and pension advice from Hilltop

While starting to save for retirement in your 50s may present challenges, it’s still possible to achieve your financial goals.

By taking proactive steps such as reviewing your investments, consolidating your pension pots, and seeking financial advice, you can increase your chances of achieving a comfortable retirement.

On the other hand, if you’re considering withdrawing funds from your pension pot from 55 onwards, it’s important to understand the options available to you and how best to manage your funds to ensure they last the duration of your retirement years.

Again, seeking professional advice is the surest route to achieving these goals.

Hilltop Financial Planning is committed to helping you navigate your pension options at any age. Our experienced advisers offer bespoke guidance tailored to your unique circumstances.

Whether exploring drawdown options or looking to consolidate your pensions, we provide the expertise to maximise your retirement savings.

Take control of your retirement savings today by scheduling a call with a Hilltop financial adviser.

Our advisers will work with you to develop a tailored strategy to meet your retirement goals, providing all the retirement planning and pension advice you need. Get in touch today on 0161 413 7051 to make the most of your retirement savings.