Pensioners who were in certain pension schemes of failed companies are in line for a share of almost £2 billion in top-up payments.

The Pension Protection Fund (PPF) – the industry-funded rescue fund for defined benefit pension schemes – will begin writing to in excess of 300,000 former staff of collapsed firms from July. Payments will be made from January 2027.

These pensioners missed out on inflation protection which they should have been entitled to as part of their payments from their company pension schemes – meaning their pension should have risen in line with prices but didn’t.

Defined benefit pensions pay a regular guaranteed income based on a worker’s salary and length of service. Many are closed to new members but are particularly valuable because of the inflation protection which boosted the retirement income.

However some pensioners were denied this valuable benefit before 1997 by their former employers, in firms that later went bust.

A recent rule change now means they will get the money they are owed. In April, the Pension Schemes Act became law, allowing the PPF and the Financial Assistance Scheme (FAS) to make the additional inflation-linked payments.

The PPF protects millions of UK defined benefit scheme members if their employer becomes insolvent. The Financial Assistance Scheme (FAS) is a separate but similar government-funded scheme designed to help those whose employers became insolvent between 1997 and 2005. Both are administered by the PPF.

A PPF spokesperson said: “Supporting our members is central to the PPF's role. The government's decision to enable us to pay inflation increases on pre-97 compensation will strengthen outcomes for many PPF and FAS members.

“Implementing this change requires significant work and we’re making good progress to be able to start paying these increases to eligible members from January 2027. We will continue to keep members fully informed throughout."

Who will get payouts?

The change in the law applies to PPF and FAS members whose former pension schemes promised to pay its members pre-1997 inflation-linked increases in their retirement payments.

Prior to 1997 – long before the PPF and FAS were set up – the law did not compel employers who provided defined benefit scheme pensions to also provide inflation protection for their members’ retirement income.

In practice the majority of defined benefit pension schemes did, in their scheme rules, provide inflation protection, but not all.

When the PPF and FAS were set up, the founding legislation (Pensions Act 2004) did not allow these lifeboat funds to pay pre-97 inflation-linked increases to all their members.

Now, however, the change in the Pension Schemes Act applies to PPF and FAS members whose former schemes promised pre-97 indexation as a right.

The PPF has, in the past months, reviewed the scheme rules of all 2,000 schemes which have transferred to the PPF and FAS.

Having completed this exercise, the PPF has determined that in excess of 300,000 members will be eligible for pre-1997 inflation-linked pension increases in the future.

Affected pension scheme members don’t have to do anything. The PPF will write to those eligible from next month.

Younger people should be given the choice to take a year of their state pension early in exchange for working longer, a think tank has said, in a report that takes aim at intergenerational wealth unfairness.

The so-called ‘Citizens Advance’ would give people a choice – receive a lump sum now in exchange for postponing the point at which they start receiving their state pension.

Only those who had built up 10 years’ worth of National Insurance contributions would be eligible.

At the current full new state pension rate for a year, those using such a scheme could be given up to £12,547 decades before state pension age.

The proposal, put forward by think tank the Social Market Foundation and Andrew Lewin, the Labour MP for Welwyn Hatfield, highlights how family wealth levels can “alter the course of people’s lives”.

While only a third of adults expect to benefit from an inheritance, those who do will share in some estimated £5.5 trillion expected to be passed down by Baby Boomers in the “Great Wealth Transfer”.

“As the Great Wealth Transfer takes place, the sense of injustice around wealth inequality may only therefore increase without government action. Something has to give,” said the report’s authors.

Rachel Vahey, head of public policy at AJ Bell, said: “The obvious potential benefit to this particular proposal is it could deliver a much-needed cash boost at a time many people really need it, particularly if they’re trying to repay debt or save for a deposit on a first home.

“The downside is that in doing so they would have one year less of state pension income to rely on in later life.”

We look at how much you need for a comfortable retirement in a separate article.

Early state pension lump sum

Support for the policy suggestion was, perhaps unsurprisingly, strong among 25 to 40-year-olds, who might expect to be the key beneficiaries, according to the report, which surveyed 2,000 adults, did AI-led qualitative interviews with 300 respondents and carried out three focus groups.

Most in the 25 to 40 year old age group were in favour of a Citizens Advance, irrespective of whether they would take it, with 54% positive versus just 6% negative. The rest were ‘neutral’ on the idea.

A majority of this age group said they would take such an advance if it was offered, ranging from 50% to 70% depending on the value of the lump sum, length of state pension given up and restrictions on how it can be spent.

The SMF report suggested an early cash advance lump sum could help revive home ownership dreams among the young – with more than two-thirds of 18 to 40-year-old non-homeowners currently of the view property ownership is a dead idea for their generation.

But the report also finds over-indebtedness is increasingly widespread, and a lack of wealth is holding people back from starting a business or family – debt repayment was the most popular intended use of a Citizens Advance, chosen by 18% of respondents to an SMF survey.

People asked in the SMF survey also described the value of the policy in emotional terms, not just financial, calling it “empowering” and allowing them to take matters into their own hands.

What would an early state pension lump sum cost?

A policy to give a year of state pension early could be delivered for £1.3 billion in year one, depending on how eligibility is set, according to the SMF report.

The size of the lump sum, whether it is taxed, who is eligible and how it is rolled out could all affect how much the policy might cost.

An untaxed £12,500 Citizens Advance would cost an estimated £1.3 billion in its first year if it was only made available to those reaching 10 years of National Insurance credits and born from 1998 onwards – i.e. those turning 28 this year.

If it were implemented, only those who went straight into work would be able to claim the lump sum in year one of the policy, with others in the 1998 cohort becoming eligible in the following years depending on their post-18 educational pathways.

Modelling by the SMF suggests costs would grow towards £7 billion as all groups and younger cohorts become eligible and take the Citizen’s Advance over subsequent years, after which costs would increase in line with the state pension.

Costs would be higher, at least in the first few years, if the policy was made available to multiple age cohorts at once. It would take an estimated £27 billion in year one to offer the lump sum to 28 to 35-year-olds, for example, or over £45 billion for those up to 40.

Tax on proposed state pension lump sum

Annual costs are estimated to fall towards £8 billion a year over time as take-up becomes driven by those becoming newly eligible, according to the report.

Making the lump sum taxable would cut costs by a third, as would restricting it to people

earning under the higher income rate (£50,271). Limiting its uses, such as to housing only, is another way of bringing the upfront costs down.

Vahey from AJ Bell said: “A proposal along these lines would present cashflow challenges for the Exchequer, as it would need to pay the money out on demand to anyone who qualifies, whereas at the moment state pension entitlement only kicks in at state pension age.

“Even if early access was offered on the most conservative basis, this would amount to a rise in today’s government spending which would only be offset in decades, potentially creating pressure on the public finances at a time when they are already stretched to breaking point.”

Almost three million people could cut back on pension saving as a result of the impending salary sacrifice clampdown, the government’s own data suggests.

Chancellor Rachel Reeves used her 2025 Autumn Budget to announce a £2,000 cap on the amount workers and their bosses can add into pensions via salary sacrifice before being hit with National Insurance (NI) charges.

The changes will come in from April 2029 and are expected to raise £4.8 billion for the Treasury in 2029/2030 and £2.5 billion in 2030/2031.

But while this may be good for the nation’s finances, it could be a blow for people’s own pension savings.

Research by former pensions minister Steve Webb, now a partner at consultancy LCP, found the government’s own estimates suggest more than 2.8 million workers are expected to cut back on pension saving as a result of the changes.

It comes despite the government-backed Pensions Commission recently warning that people aren’t saving enough for their retirement.

The impact of pension salary sacrifice changes

Salary sacrifice has long-been a popular way for employees to make pension contributions.

Money is added into an employee’s pension pot from their gross pay, adjusting their net income. This also reduces the payroll taxes paid by an employee and employer.

But government guidance shows the cost of the relief has increased markedly, from £2.8 billion in forgone National Insurance contributions in tax year 2016/2017, rising to £5.8 billion in 2023/2024.

Without any change, it is expected that this would almost triple to £8 billion by 2030/2031.

Capping the relief will save the government money.

HMRC has previously disclosed that an estimated 7.7 million employees currently use salary sacrifice to make pension contributions.

Of these, 3.3 million sacrifice more than £2,000 of salary or bonuses.

The Office for Budget Responsibility has already warned that a consequence of the policy could be a reduction in contributions.

A Freedom of Information (FOI) request to HMRC by Webb has revealed the extent of this.

The FOI asked for the government’s assessment of the number of employees that are assumed to cut their contributions in 2029/30.

HMRC said it expects more than 2.8 million workers to reduce their contributions.

This is broken down as 2.2 million earning above the £50,270 upper earnings limit, while 666,000 will generally be basic rate taxpayers.

Webb said: “The government has presented the changes to salary sacrifice for pensions as being a relatively painless way of cracking down on a tax break mostly enjoyed by the well off.

“But these figures show that the effects of the policy will be far more damaging than had previously been admitted.”

He suggests it is hardly ‘joined-up government’ to be stressing the need for more pension saving one day through the Pensions Commission and then implementing a policy that will reduce the pension savings of millions the next.

Webb added: “At a time when the government is running a major Commission to tackle the issue of pension under-saving, it is shocking that a separate government policy will result in more than 2.8 million workers cutting back on pension saving.”

A Treasury spokesperson said: “High earners piled in huge bonuses through salary sacrifice without paying a penny in tax – a taxpayer funded perk largely benefitting the better off.

“Our fair reforms protect 95% of workers earning under £30,000 using salary sacrifice, and as IFS analysis shows, over three quarters of under 30s will be unaffected.”

Is retirement something you know you should think about but – like the 15 million identified by the Pensions Commission – are vastly underprepared for?

Research by Standard Life shows that many retirees believe modern retirement lasts longer, costs more and is harder to navigate than expected.

There’s a lot of focus on saving into a pension during working life but less attention on what to do with the savings once you get there. The insurance company found that around 30% of private pension pots are accessed at the earliest possible opportunity, with around half withdrawn in full. Nearly half of this money is spent on large expenses such as cars, holidays or home improvements, raising concerns that some people may be drawing on retirement savings too quickly without fully considering their longer-term needs.

Add to that the fact that less than 9% of Brits have a financial adviser, meaning many of you are likely fending for yourselves. Standard Life’s research found 17% of retirees underestimated how much money they’d need in retirement, while 16% admit they had not expected retirement to last as long as it has.

To counter these feelings of regret – or rather, feeling the acute benefit of hindsight – it’s sensible to plan earlier.

We asked two Chartered financial planners about some of the key questions to ask yourself when planning for retirement.

1. What does retirement actually mean to you?

Retirement once upon a time used to be a drastic, immediate change in status from ‘working’, to ‘not working’. Huge numbers of the population had worked one, maybe two, jobs their whole life. They typically retired at a predetermined age. It could take some getting used to.

Today, it can be a more gradual transition, inviting questions such as whether you want to stop work altogether or reduce hours, or what an ideal week would look like if you took phased retirement.

What are your objectives? Often plans involve more travel, house or garden renovations and finding ways to spend all that newfound free time. It’s also important to think further ahead; about security, flexibility or any legacy planning.

Estimates range from outgoings in retirement being 60%-80% of outgoings during working life but Roger Clarke, Chartered financial planner at The Private Office (TPO), said to beware blunt calculations.

“Many of these estimates can be quite crude. You may no longer have to buy a season ticket, expensive sandwiches or suits for work, but for some their expenditure will increase because they think, ‘right, I've retired, now I want to do all the travelling I've ever wanted and buy myself a nice car’.”

2. Do you know where your retirement assets are, where they’re invested and how to access them?

This is about taking stock – and doing so early.

First, think about your state pension entitlement. Megan Rimmer, Chartered financial planner at Quilter Cheviot Financial Planning, said a couple’s combined entitlement could exceed £25,000 a year, significantly covering many basic expenses. But she warned to check early whether you’re on track for full entitlement, as some people – more likely women – may not have the full qualifying years. In these cases, if you’re still working you can pay NIC3s or make additional voluntary contributions (AVCs) to make up any shortfall.

Possibly the more laborious task is taking stock of any personal or workplace pensions. According to LV, the average British worker changes jobs every five years and will have between nine and 12 jobs during their lifetime.

This means keeping on top of admin will be ever more important. Do you have final salary scheme pensions (defined benefit, or DB) or defined contributions (DC)? Where are your personal pensions?

Rimmer said: “The first thing I’d do is identify the assets that I have, where are my pensions, and what are they invested in? So many people have got pots here, there and everywhere, and they don’t know what their value is or what they’re invested in.

“They also don’t always know how they can take those benefits. A modern pension scheme typically offers full flexibility – you can draw a flexible income or purchase a guaranteed income, or annuity – but some older pension schemes don’t offer that, which is important to know.”

Describing final salary schemes as like “gold dust”, Clarke added: “It’s important to not lose track of those, because you know they can easily disappear into the ether if you’re not careful.”

Your scheme administrator should keep you informed, so if you’ve not heard from them for a while, it’s probably worth getting in touch.

Around 3.3 million pots are estimated lost, worth a combined £31.1 billion, with failure to update contact details among the top reasons. The government offers a pensions tracing service, which might be a useful resource if you think you have an outstanding pension from a previous job that you’ve lost track of.

3. Will you be able to afford the lifestyle you want in retirement?

This is where budgeting is crucial if you want to maintain a similar lifestyle.

Rimmer said to categorise expenditure into three headings: basic, discretionary and holidays. Basic covers all the essentials: household bills, mortgage and food. Discretionary is the fun stuff: clothes, eating out and leisure activities. She advises mapping out holidays separately, covering big annual spend and smaller weekends throughout the year.

Clarke said at TPO they refer to the ‘smile’ model of retirement expenditure, with more discretionary spend in the early years of retirement, which then tails off slightly before potentially picking up again if long-term care costs become necessary.

It’s important to ask not ‘how big is my pension pot?’, but ‘what level of income will support the life I want?’

Using a cashflow planning tool, ideally five to seven years out from retirement age, can help model various scenarios and identify any potential shortfalls.

4. Are all your savings and investment pots structured in their most tax-efficient way?

Pension contributions are one of the most tax-advantageous investment tools you can currently make. This is especially true for higher-rate taxpayers, company directors and limited company owners.

The Pensions Commission report, out earlier this month, revealed that just 4% of self-employed people were saving for retirement.

While pensions can make more of long-term growth and tax relief, the flexibility and tax-free access of ISAs are their main plus points.

“Pension contributions are particularly attractive if you’re a higher-rate taxpayer because most people, whether they’ve got a personal or a workplace pension plan, they’re paying in and getting relief at the higher rate.

“But then when they retire, in most cases they’ll go from being a higher-rate taxpayer to a basic-rate taxpayer,” Clarke said.

For business owners, he believed there’s no more tax-efficient way of getting money out of the company than to pay employer pension contributions.

5. When should I start thinking about retirement?

There are different facets to ‘thinking about retirement’.

While it’s advisable to start saving for retirement as early as possible, to allow your investments to benefit from more time in the market and compounding, when it comes to the more detailed planning aspects described above, Rimmer said many people start to give it serious thought in their 40s.

They’re likely earning more, their kids may be a little older, school fees may be behind them, a deposit was saved and mortgage payments are underway.

Plus, if you take the State Pension age as 67 or 68, then to start thinking about it 20-25 years out feels near enough to be relevant, while allowing plenty of time to get organised.

In terms of reviewing your investments, both advisers suggest at least five to seven years out from the age you hope to retire. This allows time to understand if you’re on track to meet your objectives and if not, allow time for any adjustments. These might include saving more, taking more risk to increase your potential returns or restructuring any investments into more tax-efficient accounts.

Inheritance tax is a tricky topic. Taboos around speaking about money and the emotion that comes with thinking about death create a perfect storm for misunderstanding it. But with such complex rules around inheritance, it is a topic well worth talking about – and sooner rather than later.

Lisa Conway-Hughes, a certified financial adviser and founder of LCH Wealth, speaks to Kalpana Fitzpatrick on MoneyWeek Talks about how the inheritance tax regime is changing from April 2027. She reveals her biggest trick to help protect your pension. Tune in now on YouTube or on most podcast platforms.

About the podcast

MoneyWeek Talks is a podcast that helps you unlock the secrets to financial success. Editors Kalpana Fitzpatrick and Andrew Van Sickle are joined by influential guests – from CEOs and entrepreneurs to economists and policymakers – to share their top tips on managing money, investing wisely and building wealth.

Subscribe to the MoneyWeek Talks podcast and get ready to make it, keep it and spend it with confidence.

Becoming a centenarian used to be a rare occurrence, but joining the 100 club will become increasingly common in the future, data suggests.

A fifth (19.1%) of girls and a tenth of (12%) boys born in 2024 are expected to live past 99, according to the latest data from the Office for National Statistics (ONS).

This is expected to rise to 26.3% of girls and 18.3% of boys born in 2049. Meanwhile, a girl born in the UK in 2024 has a life expectancy of 90.2 years and boys 86.9, but by 2049 this is forecast to reach 92.4 and 89.6 years respectively.

Later life outcomes are rising for older people too. Women reaching 65 in 2024 can expect to live another 22.7 years while men of the same age will live for another 20 years on average. This is up from 20.4 for women and 17.6 for men turning 65 in 1999, the data from the ONS shows.

But with later life expectancy comes the burden of funding retirement for longer.

Sarah Coles, head of personal finance at investment platform AJ Bell, said: “For retirement, the great unknown is how long we can expect to live.”

In this guide, we look at how you can boost your retirement cash pot and cover care costs in later life.

How to future-proof your retirement and boost your pot

A good start is using the ONS’s life expectancy calculator, which gives you a rough estimate of what age you might live to based on your age and gender.

For example, under current forecasts, a 45-year-old woman is expected to live to 87, according to the calculator. A 55-year-old man is forecast to live to 84.

It’s also worth using a pension calculator to get a forecast of the likely pension income you’ll have in retirement.

MoneyHelper’s calculator asks you questions about your gender, age, current income and when you want to retire, as well as your current workplace and private pension contributions, to tell you if you’re on track to hit a desired yearly retirement income.

If you find you’re coming up short, there are steps you can take to boost your pot.

Increasing pension contributions

Increasing your pension contributions is one of the most effective ways to boost your retirement pot, especially if you start early, allowing for savings to compound.

You can add more to a private pension like a SIPP or contribute more to a workplace pension.

The current minimum contribution to a workplace pension under auto-enrolment rules is 8%, made up of 5% from your wages and 3% on top from your employer, but you can increase these contributions.

Money added to a pension will benefit from tax relief from the government too, extra money you would have paid in tax which is added to your pension instead.

Adam Cole, retirement specialist at wealth management firm Quilter, said: “The most effective step (for boosting pension pots) remains increasing pension contributions early, even modestly, as time and compound growth do most of the heavy lifting.

“Many people still anchor contributions to minimum (8%) auto-enrolment levels, which are unlikely to produce a large enough pot to support a comfortable retirement.”

You can also sign up to a pension salary sacrifice scheme with your employer, which could reduce your overall income tax and National Insurance burden.

Review default workplace pension funds

When you’re auto-enrolled into a workplace pension, you’ll be put into a default fund, meaning your contributions are invested and managed for you.

Nest, a major UK workplace pension provider, says 99% of its 14 million members are in a default fund.

However, if your default fund doesn’t match your risk appetite, you could move away from it and into another riskier fund with potential to offer better returns.

Do note, switching out of a default fund will mean you have to take on more of an active role in managing your pension, and your pot could end up worse off than if you’d left it in the default fund.

Make sure you’re set for a full state pension

You need 35 years worth of National Insurance contributions (NICs) to receive a full new state pension, worth £241.30 a week as of 2026/27. You need at least 10 years of NICs to receive any new state pension.

However, you may not have enough qualifying years to receive the state pension you want, for example if you took time out of work to look after children or to care for a loved one.

You can use the government’s tool to find out how much state pension you’re on track for. If you’re not set to get the amount you want, you might be able to claim free National Insurance credits or you can top up your NI record by paying for voluntary NICs.

Do note, the state pension age is rising from 66 to 67 between 2026 and 2028 and from 67 to 68 between 2044 and 2046 meaning you'll have to wait longer to claim it. It could rise further in the future due to rising life expectancies.

How to cover care costs in retirement

Care can be a significant outgoing later on in retirement, but there are ways to help fund it or cut costs. One of the main ways is an immediate needs annuity.

Immediate needs annuity

If you don’t qualify for any free help through the NHS, you could buy an immediate needs annuity to cover the cost of care.

You typically buy one through a lump-sum payment, with any income paid directly to the care provider tax-free.

Some plans will also increase the value of payments over time to keep up with inflation.

Emma Walker, director of retirement firm Just Group, said: “An immediate needs annuity can take away the risk of seeing nearly all the elderly person’s assets from being swallowed up by care costs if they do end up needing an extended period of care.

“There is no investment risk and securing a flow of sufficient income by paying the annuity premium can effectively protect the remaining value of the estate.”

You can also buy deferred needs care annuities, which start paying out months or years into the future when you might expect to be needing care.

Deferred needs care annuities can be cheaper than immediate needs annuities because you’re older when they're triggered.

Meanwhile, locking in a rate earlier can lead to higher payments if annuity rates drop later on.

We look at how you can use equity release to cover care costs in another article.

Around 15 million people are under saving for retirement, even with auto-enrolment, a new report from the Pensions Commission has warned.

The Pensions Commission was revived by the government last year to identify the challenges to retirement saving and make recommendations on how to boost contributions.

Back in 2006, the first Pensions Commission led to the roll-out of auto-enrolment into pension saving.

But 20 years later, there are warnings that too many people are sticking to the minimum level of contributions, which may not be enough for a comfortable retirement.

The latest Pensions Commission report looked at the necessary income replacement rates for those who have retired, suggesting around two-thirds of pre-retirement earnings is required.

Using these metrics, around four in 10 (43%) of the working-age population (15 million people) are under-saving, according to the report.

This figure could even reach as high as 19 million without action, the report warns.

Those born between 1965 to 1980 - are projected to have the worst outcomes, with 46% falling below these targets.

Low and middle earners, the self‑employed and women are most at risk, the report warns, as the pensions system fails to evolve to meet modern working lives.

Pensions minister Torsten Bell said: “Britain has got back into the pension saving habit, but the job is only half done with tomorrow’s pensioners still on track to be poorer than today’s.

“The Pensions Commission sets out clearly the scale of the challenge: not enough people are saving for retirement, and many of those that are aren’t saving enough.

"The Commission warns that without action millions more people could be at risk of becoming reliant on state support in retirement.”

Here are the main problems with pension savings that the report identified.

People not saving enough into a pension - even with auto-enrolment

Automatic enrolment has been a major policy success, the report claims, particularity as it means most people in work will be saving for their retirement.

But the Pensions Commission highlights that a third of eligible private sector employees have contributions that only follow the minimum automatic enrolment contributions.

This means that currently 8% of earnings - 5% from the employee and 3% from the employer - between a lower threshold of £6,240 and a ceiling of £50,270 – and this rises to half of the lowest-paid eligible employees.

The median earner is contributing 1.7% of pay above automatic enrolment minimums, according to the report, and where there is additional saving, the evidence suggests that this is led by employer behaviour rather than individual initiative and is more likely to benefit higher earners.

The Commission said it will consider how the eligibility criteria, income thresholds, and minimum contribution rates for automatic enrolment will need to be adjusted in the future.

It isn’t just contribution rates that are an issue though.

The report highlights that the variance in investment returns is wider in the UK than in comparable countries and can greatly affect outcomes. It suggests that the Pension Schemes Act could help address this by boosting how money is invested.

People not saving into a pension

Almost half of working‑age people are not saving into a pension in a typical month, and almost half of those not saving are in paid work.

The report highlights that while opt-out rates for auto-enrolment are low, there are some groups who are excluded.

It highlights that 14% of employees – 4 million people – are not eligible due to automatic enrolment’s age limits and £10,000 earnings trigger.

Additionally, approximately 4 million self-employed workers in the UK don’t have access to auto-enrolment.

Only 17% of the self-employed currently save into a pension, which falls to just 4% for those who earn only from self-employment, the report warns.

The problem with pension freedoms

Savers can start making pension withdrawals from age 55 - rising to 57 from 2028.

The Pensions Commission warns this creates risks, particularly with pension freedom rules providing extra flexibility on how the money is taken.

On current trends around three in 10 private pension pots are accessed at the earliest possible opportunity with half of all pots taken out in full. Nearly half of these are spent on large expenses like a car, holiday or renovations.

The Pensions Commission said: “Managing pension pot access so it lasts over thirty years from age 57 to 87, for example, is no easy feat. Since these changes, we have seen high levels of full cash withdrawals, widespread early access of ‘tax-free lump sums’, and high withdrawal rates that risk running down savers’ pension wealth too quickly.”

What retirement reforms is the Pensions Commission recommending? 

The Pensions Commissions is due to make recommendations next year.

But its latest report does provide some indication of its thinking.

It suggests that for pensioners in 2050 and beyond to have adequate incomes in retirement, they will require higher rates of private pension saving and higher coverage too.

That could mean changes to automatic enrolment eligibility, earnings thresholds and the statutory minimum contributions.

The report said: “Low and middle earners are not saving sufficiently and the system does not work for the self‑employed.”

The report also suggestions there should be more protections for people accessing their pension pot.

Jon Greer, head of retirement policy at Quilter said closing the pension gap cannot rely on a single lever.

He suggests financial education has a role to play but structural change is needed, particularly for the self-employed.

He said: “More flexible savings solutions, alongside mechanisms that replicate the success of automatic enrolment in this group, will be essential if participation and adequacy are to improve together.”

But all of this is playing out against an increasingly uncertain policy backdrop, with changes to inheritance tax on pensions, salary sacrifice and the possibility of state pension reform.

Greer added: “When the rules of the system appear to be in flux, it becomes harder to make the long-term decisions that pension saving requires. Stability and clarity are critical if people are to commit more of their income over decades.”

The government is under growing pressure to reform the controversial triple lock on the state pension.

Set up under the Tory government in 2011, the triple lock is used to calculate how much the state pension should increase by each year.

Under the mechanism, the state pension increases annually by the highest out of average earnings, inflation or 2.5%.

It has become an expensive policy commitment though, sometimes rising above inflation due to high wage growth.

The Office for Budget Responsibility (OBR) has estimated that the triple lock will cost around £15.5 billion per year by 2029/30, which is three times more than originally forecast.

Critics warn that it creates a generational divide between pensioners and those still working, who do not benefit from increases of the same level.

Some groups, such as the Institute for Fiscal Studies, have even called for it to be scrapped.

Labour committed to maintaining the triple lock in its 2024 general election manifesto but the higher costs, ageing population and strained public finances mean there could be extra pressures to reform or scrap the policy.

Three separate reports in recent weeks, from the Tony Blair Institute for Global Change, the intergenerational foundation and the International Monetary Fund (IMF) have pushed for change, warning that the costs are becoming unsustainable.

Plenty of financial professionals agree that change is needed.

Martin Rayner, financial adviser at Compton Financial Services, said: “Welfare spending now exceeds income tax revenues and is still rising.

“At some point politicians have to decide whether they keep making promises or start dealing with reality.

“Reform is inevitable. Scrapping it outright would be politically toxic, but moving to a link based on earnings or inflation over a longer timeframe is far more likely.”

How could the state pension be reformed?

The government’s pension reforms may be more focused on getting people to save more for their retirement, but there is growing pressure to reform the state pension with lots of proposals raising alternatives to the triple lock.

The International Monetary Fund (IMF) this week warned the UK needs a “transparent public debate” on public spending and suggested reforms could include replacing the triple lock with a policy of indexing the state pension to the cost of living.

It comes as a report from the intergenerational foundation, Time to Unlock: Why it’s time to reform the triple lock on the State Pension, found that state pension spending has increased by almost 70% in real terms over the past two decades.

This year, the state pension is expected to cost around £146 billion, or around 5% of GDP, up from £86 billion in 2005/06, the report warns.

The think tank said its preferred reform would be to cap state pension increases at inflation until 2030/31 and then increase it by the average of inflation and earnings after that.

It said this would reduce the volatility associated with the triple lock while still preserving a link between pension increases and broader improvements in living standards.

This approach has also previously been recommended by the Organisation for Economic Co-operation and Development (OECD).

Perhaps the most extreme reform idea is from the Tony Blair Institute for Global Change, which has proposed totally replacing the current state pension with a new Lifespan Fund, which would effectively scrap the triple lock.

Instead of claiming the state pension once they've reached state pension age, people would build up credit in the fund through work and activities and can access it, for example if they need cashflow due to an unemployment spell of up to six months.

The think tank said this would only be permitted for those taking time out of work to “boost their future earnings potential or to engage in another socially useful activity”. This may include caring responsibilities.

Individuals would be able to choose when to retire and receive a personalised amount based on their age and life expectancy.

Its analysis suggests this could save the Treasury around £19 billion a year by 2035/36, rising to £38 billion a year by 2045/46. By the mid-2030s, that saving would be equivalent to almost £1,000 a year for every working household in Britain, according to the report.

Will the Labour government scrap the triple lock?

Scrapping the triple lock would be a pretty controversial decision, especially given Labour made a manifesto commitment to keep it.

But critics may argue that Labour also committed to not raising taxes, while some say it has scaled back commitments to leasehold reform.

There is a pretty big reason why Labour, or any government, won’t scrap the triple lock though.

Around a fifth of the population are of state pension age. That is a big part of the electorate to alienate if you reduce their future payments.

Research by AJ Bell shows that 38% of Brits believe the state pension triple lock should be made permanent, compared to just 6% who want it to be scrapped.

Unsurprisingly there is a significant generational divide, with more than two-thirds (68%) of ‘Baby Boomers’ angling for a permanent triple lock versus just 14% of Generation Z (aged 18-29) and 22% of Millennials (aged 30-45).

Tom Selby, director of public policy at AJ Bell, said: “The reason is almost certainly cold political calculus. A significant section of the public support the triple lock, particularly older voters, and any party indicating it will not pledge allegiance to the policy risks being annihilated at the general election.

“With inflation running hot, there may also be a feeling that the 2.5% underpin might not kick in for a while, meaning there are no guarantees ditching this element in favour of a ‘double-lock’ will actually save any money in the short term.”

Eamonn Prendergast, chartered financial adviser at Palantir Financial Planning, added: “It’s politically difficult to scrap — pensioners are a key voting group, but over the long term it becomes harder to justify in its current form. Reform is more likely than abolition, but any government that touches it risks a significant backlash.”

The government appears unlikely to budge for now.

Pensions minister Torsten Bell answered a parliamentary question at the end of April on state pension support where he reiterated the government’s commitment to the triple lock.

The bigger issue may be whether this government is able to make difficult decisions at all given potential leadership challenges.

Rayner, from Compton Financial Services, added: "Labour already appears politically paralysed, with every significant policy meeting backlash and a prompt U-turn. That makes meaningful reform harder, but delaying it simply means the eventual changes are likely to be far harsher."

An HM Treasury spokesperson said: “By keeping the triple lock, 12 million pensioners will see their income rise by up to £470 this year, and they continue to benefit from the highest personal allowance in the G7.”

A spokesperson for the Department for Work and Pensions said: "Supporting pensioners is a priority and our commitment to the triple lock for the rest of this Parliament means millions of pensioners will see their yearly state pension rise by up to £2,100.”

Pensioners are completely cashing in more than 100,000 more pensions today than they were seven years ago when records began, according to new analysis.

Data published annually by the Financial Conduct Authority (FCA) shows since the tax year 2018/19, the number of people cashing their pensions in full each year has increased 29% – or by 105,038.

Withdrawing a pension in full – rather than just taking the 25% tax-free lump sum and then sticking to the 4% rule or even the 6% rule – can seem attractive, but it can be costly.

For one thing it can trigger unexpectedly large income tax bills – the withdrawal is treated as income, so it can push savers into a higher tax bracket in a single year (and potentially fall foul of the 60% tax trap). This means a significant portion of their retirement pot may end up going straight to the taxman.

Georgie Edwards from TPT Retirement Solutions, a workplace pension provider that carried out the analysis, said the data “highlights the need for better guidance so retirees don’t erode their savings – or pay more tax than they need to”.

We look at ways to reduce your tax bill in retirement in a separate article.

Small pension problem

If more people are cashing their pensions in full, it suggests that increasingly the amount people have saved at the point of retirement simply isn’t big enough to offer meaningful income via pension drawdown.

By pot size, more than 300,000 pension pots withdrawn in full in 2024/25 were worth less than £10,000. A further 112,526 were worth between £10,000 and £29,000, the analysis found.

Looking across age brackets, there has been a 75% increase in 65 to 74-year-olds withdrawing their pensions in full between 2018 and 2025. For those aged 55 to 64, the rate of pensions being withdrawn in full rose by a lesser 15% over the same over this period.

Source: FCA

Edwards said: “The rise in people cashing in their pensions in full is a worrying signal about retirement adequacy in the UK. For many, it’s not a strategic choice but a sign their savings aren’t sufficient – and some may also be reluctant to consolidate pots, missing the chance to build a more sustainable income.”

Ad hoc withdrawals have also increased. The number of pension plans from which an ad hoc partial withdrawal was made in 2018/19 was 163,335. In 2024/25, this had reached 328,419 – marking a 101% increase. These types of withdrawals can also incur large tax bills.

“In some cases, savers are stuck in legacy products that don’t offer flexible options like phased drawdown or regular uncrystallised funds pension lump sum (UFPLS), effectively forcing higher withdrawals than they’d prefer and increasing their tax exposure,” Edwards added.

Source: FCA

Things to consider before withdrawing all of a pension

Withdrawing all of a pension in one go is a big decision. The money typically can’t be put back and there are often several tax implications. Ian Futcher, financial planner at Quilter, explains what you should consider before cashing in your retirement pot.

1. Higher income tax

As already mentioned, taking a whole pension pot may provide immediate access to cash, but many people underestimate the potential tax consequences. “Although 25% can usually be taken tax free, the remaining balance is taxed as income in the year it is withdrawn, which can unexpectedly push someone into a higher or additional rate tax band,” Futcher said.

2. Danger of running out of money

Pensions are designed to provide an income over what could be a retirement lasting 20 or 30 years. Fully withdrawing savings too early can leave people more financially exposed later in life, particularly as inflation and care costs remain ongoing concerns, Futcher pointed out.

3. Wealth taxes

“Money left within a pension continues to benefit from a tax-advantaged environment. Of course, some of those benefits can be retained if funds are moved into other wrappers such as ISAs. But, said Futcher, “large one-off withdrawals will often leave at least part of the money outside those protections and potentially exposed to income tax, dividend tax or capital gains tax over time”.

4. Managing inheritance tax

Pensions will fall within estates for inheritance tax purposes from 2027. However, that does not automatically mean emptying pension pots early is the right response, said Futcher: “Keeping funds within a pension can still offer valuable tax efficiency and long-term planning flexibility.” For example, those focused on passing on wealth can consider other options, such as gifting from surplus income.

The “vast majority” of pensioners will miss out on the government’s plans for an income tax exemption from next year, new research suggests.

In the 2025 Budget, chancellor Rachel Reeves announced pensioners whose sole income is the basic or new state pension would not need to pay the “small amounts” of tax via simple assessment if the state pension exceeds the tax-free personal allowance from 2027/28.

It was positioned as easing the “administrative burden” but the government has since clarified pensioners in this situation won’t have to pay income tax at all from 2027/28, if their pension exceeds the personal allowance from that point

It came as the chancellor announced the allowance would be frozen at £12,570 until at least April 2031. The threshold last increased in April 2021.

This proposed waiver is intended to stop pensioners solely reliant on the state pension (with no other taxable income or pension ‘increments’) having to pay tax on the payment.

Only around 5.5 million pensioners – or just one in 18 – will be eligible for the concessions, former pensions minister Sir Steve Webb, a partner at pensions consultancy LCP, said.

The full new state pension of £12,548 sits just £22 below the tax threshold and the government expects the rate from next April to rise above the threshold for the first time, given high inflation, wage growth and the triple lock.

The old state pension, by comparison, is much lower than the threshold and even with expected rises looks set to remain so, meaning people solely on the old state pension would not have to pay income tax anyway.

How will the government proposals affect different groups of pensioners?

Webb has called the disparity of treatment between groups of pensioners under the proposed scheme “bizarre”, as LCP’s research flags how few people will actually benefit from the move.

The firm’s new report, ‘The tax treatment of state pensioners’ highlights that anyone who reached pension age before 2016 – when the flat-rate, single tier system replaced the two-tier system of basic plus additional state pension (SERPS or S2P) – will not benefit.

LCP said based on current data for 2025/26, none of the 8.1 million pensioners in the old state pension system will qualify for the exemption. This is either because they are only receiving the old state pension, which at £9,614 a year currently falls below the income tax threshold anyway or – in the case of 6.5 million of them – because they also receive additional state pension (either under SERPS or state second pension) and therefore are receiving a pension “increment” on top of the basic payment.

Similarly, most of the five million people on the new state pension (anyone hitting retirement age after 2016) may also miss out.

The firm calculated that 290,000 are not based in the UK; one million receive pension ‘increments’ or protected payments; 1.1 million have a new state pension rate that will remain below the income tax threshold in the next three years; and 1.8 million have other taxable income, such as private pensions or investment income so they are not solely dependent on the state.

Using the Office for Budget Responsibility (OBR) outlook, LCP calculated the estimated tax levels due over the remaining tax years (under this Parliament), assuming the state pension will rise by 3.7% in April 2027 and then by at least 2.5% in April 2028 and 2029.

Webb said the outlook presents some potential “cliff edges”, pushing people with even £1 of other income into a very different tax position than those without.

He said: “Someone who qualifies for this tax break in 2027/28 does not have to pay tax but someone who just misses out because of £1 of other income… will have to pay income tax not just on the £1 but also on the income tax on their state pension – a further £88. Over time this cliff edge will increase, to £153 in 2028/29 to £220 in 2029/30.”

The table below shows how much income tax would be payable without the proposed concession, for someone solely dependent on the new state pension.

Source: LCP, calculations based on the OBR’s March 2026 Economic and Fiscal Outlook for April 2027/28, then assumes a minimum increase of 2.5%.

Webb gives the example of someone with a small pension pot under auto-enrolment who cashes it out at retirement, therefore taking some taxable income and no longer being classed as solely dependent on the state.

Speaking to MoneyWeek, he said the government’s reference to the old basic state pension might be perceived as an even-handed benefit, whereas it was more of a red herring.

He said: “Freezing tax thresholds for a year or two is manageable. Freezing them for nearly a decade creates more unintended consequences by making a structural shift to the tax system in a ‘back-door’ fashion that isn’t fully thought through.

“Instead, we need a fundamental ‘root-and-branch’ review of the system – why we have tax thresholds in the first place, whether we should have the same rates for pensioners as for working people and so on.”

What are some alternative ideas to the new tax concession for pensioners soley getting the state pension?

He said he appreciates this is being presented as a short-term fix to the end of the current Parliament and is suggesting two potentially ‘cleaner’ solutions.

One option, albeit more expensive than the current proposal, is a broad-brush increase in the tax allowance for all pensioners.

Webb added: “But this would come at a considerable cost because it would also benefit the eight-million-plus pensioners already paying tax. This would not be a targeted solution to the problem.”

He also suggested writing off all small tax bills for pensioners, which would be a cheaper, more targeted option focused on the group of most concern. It would also not discriminate between those on the old and new tax systems.

“But it would still be only a temporary fix and would still leave any future government with a headache as to how to tackle the growing cost of such a measure.”

Webb added that the government already has a line at which it writes off small tax bills but it’s just less well-documented.

“I'm pretty sure HMRC doesn’t send out self assessment demand letters for amounts of £4. It’s taxpayers’ money and why shouldn’t that be paid? We know they clearly have a line already, all I'm saying is just make it bigger.”

LCP also warns the policy presents potential problems for the next government as any write-offs get more expensive over time.

Webb said: “By 2029/30 it looks as though the pensioners who do benefit will have over £200 per year in income tax written off. If the policy continues into the next Parliament it will get more and more expensive with every passing year, but will be hard to switch off – a bit like the triple lock.”

A HM Treasury spokesperson said: “Pensioners whose only income is the basic or new state pension, without any increments, will not have to pay income tax over this Parliament. “

A think tank led by former UK prime minister Tony Blair has called for the current state pension to be ditched and replaced with a new flexible fund from 2030.

The Tony Blair Institute for Global Change has proposed introducing a “Lifespan Fund” from the end of the decade. The suggested reform would see the triple lock, used to uprate the UK state pension at a great cost to the government, scrapped.

It comes as the number of people aged over state pension age is set to rise from 12.6 million in 2026 to over 18 million by 2070, taking the cost of the state pension from 5% of GDP now to 7.7% by 2070, according to the Office for Budget Responsibility (OBR).

State pension reform: What is the Tony Blair Institute for Global Change proposing?

Under the think tank’s proposals, individuals would build up credit through work and other activities. They would have the option of drawing on it during their working life, for example if they need cashflow due to an unemployment spell of up to six months, or if they have had to take on caring responsibilities.

The report says this would only be permitted for those taking time out of work to “boost their future earnings potential or to engage in another socially useful activity”.

Individuals would be able to pay a higher contribution rate after returning to work to ensure their eventual entitlement was enough to live on.

The report also suggests scrapping the state pension age and replacing it with a system where individuals could choose when to retire and receive a personalised amount based on their age and life expectancy.

That said, access to funds would only be possible if an individual had built up enough credit to ensure their pot would last at least 10 years.

The think tank says this would mean those with shorter life expectancies, often on low incomes, could draw on the income from their fund sooner.

The proposals also put forward the idea of getting rid of the triple lock and uprating payments in line with average earnings.

Calculations by the Tony Blair Institute for Global Change suggest the Lifespan Fund would significantly lower the burden on the public purse.

They estimate the new fund would cost 5.31% as a share of GDP by 2073/74 compared to 7.65% if the current state pension system stayed in place.

New Lifespan Fund would be a ‘huge backward step’

Steve Webb, former pensions minister and now partner at pension firm LCP, has raised concerns over the proposals.

He said: “We have just created a new state pension system which is relatively simple and standardised, and which forms a firm basis for retirement planning.

“It would be a huge backward step to replace it with something fiendishly complex and highly intrusive, and which would take many decades to implement in full.”

Webb, who was pensions minister when the triple lock was introduced in 2011, added the idea of linking state pension payments to individual health records and life expectancy was “deeply troubling”.

“Leaving aside issues of confidentiality and data quality, it is very hard to make a precise leap from health records to life expectancy,” he said.

“The report says that they would not want to pay higher pensions to those who had poorer health because of lifestyle choices such as smoking, but it is very hard to see how they would exclude the impact of smoking on someone's overall health.”

Tom Selby, director of public policy at investment platform AJ Bell, echoed Webb’s comments, saying an overhaul of the state pension “could create even more uncertainty as well as complexity”.

“The most radical ideas, like setting incomes based on personalised life expectancy and health data, will surely never get off the ground,” he said.

However, Selby said the report could be “a decent guide to future policy thinking”, including that the triple lock needed to be scrapped.

He said moving to uprating payments in line with earnings “feels a reasonable compromise”, while allowing people to take state pension income at a younger age “isn’t completely inconceivable".

We look at the alternatives to the triple lock in another article.

What is the state pension triple lock?

The state pension triple lock is the promise that the UK's state pension will always rise each year at least in line with the higher of inflation, average wage growth or 2.5%. It's a win-win-win for state pensioners – they always get the highest of the three “locks” – if not for taxpayers. The idea was to address pensioner poverty. From the 1980s to the 2000s, the state pension rose solely in line with price inflation, and in an age of decent wage growth, that meant pensions fell well behind earnings (from 26% of the average wage to just 16% by the 2000s). In 2011, the pension triple lock was introduced to slowly steer state pensions back into line with rises in national living standards.

Has the pension triple lock worked?

Broadly, yes. The state pension triple lock has nudged up the real value of pensions to the point where they are a decent safety net for low earners and a good base for the better-off. It now sits at £241.30 per week (for those qualifying since 2016; or £184.90 for those on the previous system). Since 2011, state pensions have risen 89% in nominal terms. If they'd risen solely in line with inflation, they'd have gone up only 60%, or 66% if in line with wage growth. The UK's (new) state pension of £12,548 a year is not generous compared with some, but it has done its job in helping the state pension keep up with earnings. It is now about 30% of full-time median earnings.

Is the state pension triple lock good for pensioners?

Indeed yes, and not just for the poorest. If a 66-year-old wanted an annuity escalating at 2.5% to 5% a year – a proxy for the pension triple lock – it would cost £215,000-£283,000, says Jonathan Guthrie in the Financial Times. By comparison, the median level of private pension wealth in the 65-74 age band is £146,000. It's unsurprising that the state pension accounts for the bulk of poorer pensioners' income. And only 12% of households rely solely on the state pension. But the really striking thing, says Guthrie, is that even among the richest fifth of UK pensioners, it accounts for almost 30% of single incomes and 16% for couples after housing costs. It's not just nice to have, it's a basic plank of retirement planning for all but the properly wealthy.

How secure is the pension triple lock?

The government has wriggled out of the pension triple lock only once. After the Covid-19 pandemic, as the furlough scheme unwound and employment jumped, average wage growth was 8.4%, dwarfing the CPI level of 3.1%. Few people begrudged the government's decision to simply pause the lock that year and use inflation instead due to the exceptional circumstances. The following year, though, there was an almost equally massive differential again, but this time the other way round – and the government didn't intervene. In 2022 the post-pandemic inflationary shock was at its height, and in April 2023 pensioners enjoyed a hefty 10.1% rise when wage growth was at 5.4%. It is this kind of exceptional year that has had a disproportionate impact on the fiscal impact of the triple-lock policy – and makes it unsustainable in the long run.

Is the pension triple lock sustainable?

According to the Office for Budget Responsibility, the pension triple lock has pushed up spending on the state pension so that it now costs the government £12 billion more each year (and rising to £15.5 billion by 2030) compared with uprating solely in line with average earnings. Overall, the state pension costs an estimated £146 billion a year in 2025, according to the Institute for Fiscal Studies, which reckons the triple lock could see that grow by another £40 billion annually (in today's terms) by 2050. That matters not just from a budgetary point of view, but in terms of long-term planning as the retired cohort grows and the working-age population shrinks. The cost of the basic state pension, currently 5% of GDP, is set to rise to 8% to 10% over the next four decades. The volatility of the current regime is “insane”, says Tom Calver in The Sunday Times – making it impossible for policymakers to project the true long-term cost.

Why hasn't the pension triple lock been scrapped already?

A bit like the winter-fuel allowance (1997), or inheritance-tax relief on pension pots (2015), the pension triple lock has assumed such totemic significance in the national discourse that one might think it was a permanent feature of the British constitution. Politicians know that it's fiscally unsustainable and admit as much once they are safely out of office. But they are scared of fiddling with it because they fear the backlash from the people most likely to vote – pensioners. Reform UK, which had pledged to abolish it on grounds of fiscal sustainability, recently U-turned, bringing them into line with Labour, Tories and Lib Dems. Oddly, it is only the Greens – the party of fiscal incontinence and wishful thinking – who have a modestly sensible policy of ending the lock (by dropping the 2.5% bit). It's no coincidence that the left-populist party is overwhelmingly supported by young voters and rarely by the elderly.

What is the future of the pension triple lock?

Raising the pension age is one way of cutting costs, but is contentious. The loss of a year of state pension is a huge deal if you are poor with a lower life expectancy, while rich people are left (if they are lucky) to enjoy an indexed state pension into their 90s. Another idea, means-testing indexation, would be technically very complex. So a more likely reform would be either a double-lock to the higher of earnings or inflation or a simple link to earnings. Heidi Karjalainen of the IFS proposes an Australian-style “smoothed earnings link”, where the government sets a permanent target level for the pension as a share of average earnings. The pension is then uprated each year by whichever measure that keeps it on track to hit that proportion. Whatever happens, state pensions will be less generous in future so invest what you can and “rely on the state as little as possible”, says Guthrie. “It is big, clumsy and it cares a lot less about your financial wellbeing than you do.”

This article was first published in MoneyWeek's magazine. Enjoy exclusive early access to news, opinion and analysis from our team of financial experts with a MoneyWeek subscription.

Millions of UK pension savers could be missing out on tens of thousands of pounds in long-term returns by delaying contributions until the end of the tax year, new data from digital pension provider Penfold had suggested.

The start of a new tax year is a natural catalyst for pension savers to make sure they are making the most of their annual pension contribution allowances. Paying into a pension before tax year end makes sense as unused annual allowances can’t always be recovered (beyond the carry forward rules).

But while this behaviour has become a consistent annual trend, it may come at a high long-term cost.

Take someone investing £10,000 at the start of each tax year. Over 25 years they could end up with around £24,000 more than someone who waits until the end of each year to contribute the same amount, assuming 5% annual growth, according to Penfold’s calculations.

Chris Eastwood, CEO at Penfold, said: “We see this pattern every year. Many people top up their pension close to the tax deadline.

“It’s great to see people taking action. But starting earlier gives your money more time to grow, and that can make a real difference over time.”

Paying into a pension before tax year end

Analysis of contribution behaviour on Penfold’s workplace pension has revealed a clear pattern of last-minute saving.

One-off pension contributions in March reached up to 4.4 times the average monthly level seen throughout the rest of the year.

This means a disproportionate share of pension saving is concentrated at the end of the tax year, with around one in five (around 22%) of annual contributions made in March alone.

The data also shows the average contribution value in March is around three times higher than in most other months.

But those who leave paying into a pension to the last minute with a one-off lump sum could be missing out.

How pound cost averaging could boost your pension returns

Waiting until the end of the tax year to make a one-off large contribution to your pension – rather than investing regular smaller sums – not only potentially gives your money less time to grow, it can also mean you miss out on the advantages of pound cost averaging.

Standard Life gives an example: if you invest a lump sum of £12,000 and the market then drops over the next year, your investment could end up down 10%.

But if you spread that investment out and invest £1,000 each month across the year and the market drops in the same way, then you buy into the market at a lower price each time, meaning your overall investment may only drop by 5% in total.

Though if markets rise rather than fall over the same period, you’ll make smaller profits than you would have if you’d invested the lump sum.

In contrast to one-off contributions, Penfold’s data also found regular monthly contributions remain broadly consistent throughout the year, which can help with long-term saving habits over last-minute decision-making (though all pension contributions are a good idea).

“The new tax year is a good moment to reset”, Eastwood from Penfold said. “Contributing earlier and more consistently can help savers make the most of compounding and build stronger financial futures.

“Small, regular contributions throughout the year can be a simple way to build a bigger pension over time.”

Pension investors prefer to fill their portfolios with funds, according to the latest research – but they value diversification instead of ‘one and done’ picks, and are currently erring towards caution.

DIY self-invested personal pension (SIPP) investors are making strategic choices about where and how to invest their pension based on their life stage and macro economic events, according to new research.

Funds represent almost 40% of all holdings among SIPP investors on the Interactive Investor (ii) platform, according to the company’s own data, as of 31 March 2026.

But in order to achieve diversification, there is evidence investors are mixing and matching, with funds accounting for 39.8% of SIPPs, followed by 18.1% for equities, 16.2% for ETFs, and 11.5% for investment trusts.

Kyle Caldwell, funds and investment education editor at ii, said: “When it comes to the world of investing, there are some golden rules that can greatly increase the chances of investment success, with one of the key ones being diversification.

“The benefits of diversification, spreading your investments far and wide, is achieved through investing in a range of different investment types and avoiding being overexposed to one country, sector, investment style, or theme.”

Top pension investments for DIY investors

Pension savers who haven’t yet started to access their pot are unsurprisingly showing more appetite for risk as they look to grow their money over a longer timeframe, favouring global equity index funds. However, those in drawdown are focusing on income generation and capital preservation.

At the moment, very low risk money market funds are proving popular choices, both for pre-retirement and post-retirement SIPP portfolios.

Source: Interactive Investor, as of 31 March 2026

Caldwell said: “Money market funds own a diversified basket of safe bonds due to mature soon, normally within just a couple of months, meaning investors can earn an income on their cash with minimal risk.

“The fund yields, which reflect the amount of income generated from the underlying bonds held, are typically in line with the Bank of England base rate. Therefore, as things stand today, investors can procure yields of around 3.75%, which at the moment are proving inflation-beating income.”

Investors often use money market funds to park cash balances for a short period while deciding where to invest, or to guard against periods of stock market volatility. Given the Middle East conflict is ongoing some investors are more inclined to adopt a more cautious stance.

However, said Caldwell, it is important to bear in mind that balance is key. “While money market funds, given their current yields, serve as useful defenders in a portfolio, having too much in cash or cash-like alternatives for long periods will hamper long-term growth.”

Another sign of caution is shown through Jupiter Gold & Silver and Ninety One Global Gold appearing in ii’s top 10 table for SIPP drawdown customers.

Caldwell said: “In particular, gold has shown its worth as a safe haven asset that behaves differently to equity markets. However, while it ultimately proved to be short-lived, the volatility that played out for silver and gold in late January serves as a reminder that the prices of both precious metals can fluctuate rapidly.”

ii’s most-held SIPP fund choices for both accumulation and drawdown show plenty of appetite for growth assets – with global funds proving most popular.

“Global funds, both those actively managed and those that track the global market return, are potential core holdings that investors can tuck away with confidence due to the diversification on offer,” said Caldwell.

“In addition, due to their flexibility, global funds have the ability to provide greater levels of protection versus equity funds focused on a particular region or part of the market, such as smaller company shares.”

The number of people taking their tax-free pension lump sums as early as they can has hit a five year high, according to a Freedom of Information (FOI) request to HMRC.

Currently the earliest you can take your pension tax-free lump sum is age 55 (rising to 57 in April 2028). As many as 116,000 Brits aged 55 years old opted to do this in 2024/25, the FOI data, as they rushed to beat incoming inheritance tax (IHT) rule changes.

This is up from 110,000 in 2023/24, and marks a five year high for the earliest possible withdrawals of the pension tax-free lump sum.

The total value withdrawn by those aged 55 also reached a five-year high of £2.3bn in 2024/25, up from £2.1bn the previous year.

Inheritance tax pension rule change

More people have been taking lump sum withdrawals from their pensions following the announcement in the 2024 Autumn Budget that unused pensions will face inheritance tax of up to 40% from April 2027, said Andrew Tricker, chartered financial planner at Lubbock Fine Wealth Management, which submitted the FOI.

Tricker said: “As pensions will be dragged into the inheritance tax net, many are rushing to take money out as soon as they can to help mitigate what they see as excessive tax bills for their dependents.”

“What is surprising is that this trend has spread to people who have decades left based on average life expectancy.

Based on 2022 to 2024 Office for National Statistics data, life expectancy at birth in the UK is around 83 years for women and 79.1 years for men. Life expectancy at age 65 is around 21.2 years for women and 18.7 years for men.

But despite the risks of outliving their pensions, the number of people withdrawing money from their pot early is likely to rise further as the new IHT changes draw closer, said Nicholas Clark, chartered financial planner at Lubbock Fine.

Clark said: “As we get closer to the deadline, more people will tap into their pension pots – particularly those who can do so without creating a big tax liability.

“Pensions were widely seen as highly ‘tax-efficient’, so many people built and preserved very large pots to pass on wealth to their loved ones free of IHT. Some of them have now started to change course, often without fully thinking it through.”

Some are choosing to pass these funds on to their families during their lifetime to reduce IHT bills, added Clark.

Gifts made more than seven years before death generally fall outside inheritance tax, known as the seven year inheritance tax rule.

Pension withdrawal warning

But over-55s are being warned to avoid making decisions to transfer funds elsewhere without proper planning, as money withdrawn from a pension is difficult to put back.

Tricker said: “It is worrying that more people are tapping their pension pots so long before the usual retirement age. Some are taking too much, too soon. Without careful planning, they could find themselves short of money in retirement.”

“People are living longer, and health and care costs are very unpredictable in retirement. That is why retirees need a financial buffer. Income is much harder to increase once you stop working.”

In many cases, it can make sense to keep money within the pension, shop around for the best draw down provider, and draw it down gradually. Being able to review retirement income over time and adjust as needed is one of the main benefits of the pension freedoms introduced in 2015.

“Keeping funds within the pension also allows people to make greater use of the ‘gifts out of surplus income’ exemption. Income drawn from a pension can qualify as surplus income, meaning it can be passed on to loved ones without triggering an inheritance tax bill,” Clark pointed out.

A spokesperson for HM Treasury said: “We continue to incentivise pension savings for their intended purpose of funding retirement instead of being openly used as a vehicle to transfer wealth – more than 90% of estates each year will continue to pay no inheritance tax after these and other changes.”

Many Brits are facing a huge gap between when they want to retire and when their savings will actually let them, new research says – with some currently on course to have to wait more than two decades longer.

On average, people would like to retire at age 61 – five years before the current state pension age of 66 (rising to 67 in April), according to a study on Britain’s retirement expectations – and how financially prepared people are to meet them – by savings platform Flagstone.

But currently only 14% of people are on track to meet that milestone with their desired savings amount to retire comfortably.

Katie Horne, savings expert at Flagstone, said: “The fact only 14% of Britons are on track to retire when they want to is a wake-up call – but it's not insurmountable. Even those on six-figure salaries face a gap of over a decade between their desired and realistic retirement age. That shows this is as much about strategy as it is about income.”

What is your real retirement age?

The projected retirement pot of everyone surveyed – from a group of 2,000 in February – was modelled using a 5% annual growth rate and their current yearly pension contributions.

Respondents were classed as ‘on track’ if their projected pot would meet the amount needed for their chosen retirement income and age.

When it comes to income, those in the survey said they would need around £56,822 a year in pre-tax income in retirement. The pensions association Pensions UK estimates you would need, after tax, around £43,900 for a single person for a comfortable retirement, which is about the same amount.

Based on a pre-tax income level of £56,822 per year, a retirement age of 61, and the 4% withdrawal rule, the retirement pot required to support this lifestyle is around £1.42 million, according to Flagstone’s calculations, in a drawdown pot not an annuity.

However Brits aged 55 and above – the demographic closest to retiring – currently only have an average total of £146,668 saved for retirement, according to Flagstone’s research. The average contribution, across all demographics, is around £6,963 a year.

At this rate, most people won’t be able to retire until the age of 83 – a 22-year gap between aspiration and financial reality by Flagstone’s calculations.

This also means less time to enjoy retirement, with Office for National Statistics (ONS) life expectancy figures showing the average woman lives until 83, while it’s 79 for men.

Some amount of gap between desired and likely retirement is consistent regardless of income. Even those earning over £100,000 face an average ‘retirement readiness gap’ of more than ten years.

The research also showed a stark gender pension gap. The average man has £141,663 saved for retirement and contributes £7,435 a year. Women, by contrast, have saved £78,171 – roughly half as much – contributing £6,363 annually.

Closing the gap

Brits are actively doing what they can to save for retirement. A workplace pension remains the most common way to save, according to the research, used by 60% of people, followed by savings accounts (57%), and private pensions (41%).

One obvious way to grow your pension pot is to increase contributions (42% of those surveyed said they would consider this). But other tactics included speaking to a financial adviser (33%), and reviewing pension providers and fund performance (29%).

Horne from Flagstone, said: “For many, saving more is only part of the answer. Making sure existing savings are thoughtfully placed can be equally important. That might mean consolidating old pension pots, moving cash into accounts paying higher interest rates, or switching to an investment fund with stronger long-term performance.

“Even among experienced savers, time is often an overlooked factor in retirement planning. The sooner you act, the more interest you earn – and the longer that interest has to grow.”

The introduction of a scheme to protect the National Insurance records of people, mainly mothers, who might otherwise lose out when it comes to their state pension has been delayed, the government has announced today (30 March).

The delay has been condemned as “deeply frustrating” by Steve Webb, a former pension minister and now partner at pension consultancy LCP.

The issue relates to the impact of the introduction of the High Income Child Benefit Charge (HICBC) in 2013, which aims to claw back Child Benefit from higher earners. Parents – mostly mothers – can still claim Child Benefit, regardless of the charge, but if they or a partner has an individual income above the threshold, they face a tax bill which may wipe out the value of the Child Benefit.

After HICBC was introduced, hundreds of thousands of parents reacted by simply not claiming the benefit.

However this created a new problem – not claiming Child Benefit also meant not getting a valuable ‘National Insurance credit’ for anyone with a child under 12. These credits help to protect the state pension record of those who are at home raising children.

Another problem was that although parents who later realised they might miss out could make a Child Benefit claim (but ask for the National Insurance credits and not the cash benefit), such claims could only be backdated for three months. This meant they could still have years missing on their National Insurance record.

To sort out the issue, in April 2023 the Conservative government under then prime minister Rishi Sunak promised to create a system where parents in this position could be awarded ‘replacement credits’. This system was due to come into force from April 2026.

However the government has announced a delay of one year in the introduction of this scheme, which is now due to open in April 2027.

Who will be affected by the delay to the “replacement credits” system?

Those who won’t reach state pension age until after April 2027 should not be affected – provided they had not inadvertently paid voluntary National Insurance contributions for the ‘missing’ years.

But, Webb pointed out, the delay will be especially frustrating for those who have already reached state pension age or will do so shortly, and may get less in state pension than they are due. In response, HMRC has said people who have lost out, in terms of reduced state pension, may be able to claim financial assistance.

Webb from LCP said: “It is deeply frustrating to see a delay in a scheme designed to unpick a mess in the pension system. When the High Income Child Benefit Charge was introduced in 2013, some parents – mostly mothers – decided it wasn’t worth bothering to claim Child Benefit, only for them or a partner to get a tax bill for the same amount. But by not claiming Child Benefit they also threw away valuable National Insurance credits towards the state pension.

“The government promised several years ago to fix this problem by creating ‘replacement credits’, but now we hear – just a few weeks before the new system was about to be introduced – that it has been delayed by a year. The whole thing has been a mess from the start.”

An HMRC spokesperson told MoneyWeek: “We can reassure parents and carers that when the service launches in April 2027, they will still be able to claim credits going back to January 2013, meaning no one will miss out on them.

“Because those who benefit from the service will be families with children under the age of 12 since 2013, we expect very few to have reached state pension age by this April.”

What are the current High Income Child Benefit Charge rules?

Since 2024/25, if you or your partner earn more than £60,000 per year, you will be affected by the High Income Child Benefit Charge. You’ll pay 1% of the Child Benefit back for every £200 you earn over the threshold.

This means if you or your partner earns £80,000 or more, you’ll repay all of the Child Benefit through the tax. Affected parents can opt out of Child Benefit payments. This means you are still registered for Child Benefit but don't get paid the money – letting you avoid having to pay the tax charge but still receive National Insurance credits.

Previously, if you or your partner earned more than £50,000 per year, you'd have to pay some of your Child Benefit back. It would be lost entirely to the tax if you or your partner's income was £60,000 or more.

The state pension is meant to be straightforward: if you've made at least 35 years of national-insurance contributions, you'll qualify for the full amount of the benefit, currently worth £230.25 a week. However, hundreds of thousands of people are discovering that this often isn't true – they're in line to receive less than the full amount because of how they saved for retirement decades ago.

The confusion stems from a major shake-up of the state pension that took effect in 2016. Before the changes, many people were entitled to two types of retirement benefit from the state – the basic state pension and an additional payment related to their earnings, earned through the State Earnings Related Pension Scheme (Serps) or the State Second Pension (S2P). Now, anyone reaching state pension age after 6 April 2016 receives this benefit. But when Serps and S2P were still running, working people had the option of “contracting out” of these schemes via a private pension. They paid less national insurance, with cash rebated into private pensions.

Contracted out? You may not qualify for the full state pension

You may have actively chosen to contract out via an individual plan such as a stakeholder or personal pension. Or, you may have been contracted out automatically through your workplace pension scheme – many employers, particularly in the public sector, did this as a matter of course. Either way, your national-insurance contributions record will have been affected. And because you contracted out, you may not have enough full years of contributions to qualify for the full amount of the state pension.

The first step is to get a state pension forecast – you can do this online at the gov.uk site. If you're not on track for the full amount, despite working throughout your adult years, or receiving national-insurance credits for periods of caring, there's a good chance it's because you were contracted out for a period. You may have no memory of this – information on contracting out was often buried in the small print.

You haven't necessarily lost out. Those rebates were channelled into your private pension, which you'll be entitled to claim when you retire. The income that the rebates will generate may well be worth more than what you're missing out on from the state pension. However, that assumes you've stayed on top of your pensions. Many people have lost touch with savings they built up many years ago. It's vital that you trace every pension you've contributed to, so that you claim all the income you're owed. Facilities such as the Pension Tracing Service, also at gov.uk, can help.

It may also be possible to top up your national insurance contributions so that you qualify for the full state pension on top of your private savings. You can't top up for the years in which you were contracted out – these count as full years since you were saving elsewhere – but if you have other missing years on your national insurance record, you can replace these.

In theory, you can buy up to six years' worth of additional national insurance contributions; the cost of doing so varies according to which specific years you're buying back. Doing so could boost your state pension by several hundred pounds each year. However, topping up doesn't make sense in all circumstances – you may need financial advice to help you crunch the numbers.

This article was first published in MoneyWeek's magazine. Enjoy exclusive early access to news, opinion and analysis from our team of financial experts with a MoneyWeek subscription.

Investors could be able to access lower cost financial support on their pensions and investments under new simplified advice rules.

The Financial Conduct Authority (FCA) is building on its targeted support work by overhauling how consumers can access more straightforward financial advice on pensions and investments.

From 6 April, new rules will let regulated firms offer a type of help called ‘targeted support’ and make suggestions to groups of consumers with common characteristics such as those who could increase their pension contributions or hold too much cash in a current account.

But the City watchdog also wants to help those who have specific needs but can’t afford a financial adviser.

It comes as FCA data shows that only a small proportion of UK adults receive regulated financial advice about investments, saving into a pension or retirement planning.

In 2024, only 8.6% of adults (4.6m) had received regulated financial advice related to investments, saving into a pension or retirement planning in the 12 months to May 2024.

Meanwhile, the use of artificial intelligence (AI) is increasing so the FCA said firms need to adapt.

This is where simplified advice comes in.

What is simplified advice?

Simplified advice is a more streamlined, lower-cost version of financial advice that is supposed to cater for straightforward needs where a full assessment of a consumer’s circumstances may not be required such as investing a lump sum.

Firms can already do this but many have complained that regulations are unclear and they don’t want to be at risk of being sued or of mis-selling.

How will simplified advice help investors?

The FCA has proposed making its regulations more clear so that regulated firms are more comfortable about providing simplified advice.

This includes replacing the requirement for advisers to consider “necessary” information with an expectation that advisers consider “sufficient” information. This should remove some of the paperwork involved in getting advice.

Investors also may not have to complete knowledge and experience assessments if a product is straightforward and it is assumed that they have limited experience.

Additionally, there could be simplified terminology on how a client’s risk profile is described.

Where an assessment of knowledge is required, the FCA said firms can educate and increase a client’s knowledge as part of that process.

The FCA said: “In combination, these changes should help reduce unnecessary friction for firms providing, and consumers seeking, straightforward advice on mainstream products, whose features and risks can reasonably be explained and understood by consumers with little or no experience of investing.”

Under current rules, regulated firms have to provide annual reviews for clients.

But the FCA has proposed moving to periodic suitability reviews for simplified advice and said firms can charge fees for both personal recommendations and related services on an ongoing basis.

It said: “We want to enable advisers to offer a broader range of ongoing advice services, with a range of fees to meet different clients’ needs.”

Sarah Pritchard, deputy chief executive of the FCA, said: “For too long the support people need to make important financial decisions has been out of reach for many.

“A market that provides good quality, lower cost simplified advice alongside comprehensive financial advice and targeted support will better support people making decisions about their financial lives. We want to see more people getting supported, who aren’t currently, and a market that innovates and offers tailored services to meet differing consumer needs.”

The consultation closes on 22 May 2026 and changes could be introduced by the end of the year.

Rob Hillock, head of personal financial planning at consultancy Broadstone, said the FCA’s plans are an important step towards closing the long-standing advice gap in the UK.

He said: “Too many people are making complex decisions about pensions, investing and retirement without any support, so creating a clearer framework for targeted support and simplified advice could significantly improve access to help.

“This could fundamentally change how people access financial help in the UK, moving the system away from advice being only for the wealthy towards more scalable support for the mass market.”

The government is hoping that the creation of pension mega funds could boost the UK economy and reduce fees for investors, but experts warn that risks remain.

New pension reform legislation currently going through parliament aims to shake up the way defined contribution (DC) schemes invest.

The Pension Schemes Bill wants to create mega funds that merge smaller multi-employer schemes, known as master trusts. The Bill is currently going through Parliament.

The idea is that these will invest in assets such as infrastructure to boost the UK economy.

The legislation also requires these master trusts to be a minimum scale of £25 billion by 2030 and threatens to ‘mandate’ them to invest in British private investment markets if they don’t meet a minimum threshold.

The Bill also creates a ‘value for money’ framework designed to help trustees assess how a scheme is performing and to force the consolidation of smaller schemes.

The Treasury claims that the move to pension mega funds - inspired by the success of similar schemes in Australia - will give savers a 0.06% reduction in fees.

But a new report from former pension minister Steve Webb, now a partner at consultancy LCP, compiled with Frontier Economics warns that these interventions could actually impact the performance of pension schemes, ultimately reducing returns for savers.

Here are the main concerns raised about the government’s pension reforms.

Master trust changes

There are around 30 master trusts in the UK.

These make it easier for employers to set up a scheme by just joining one that works for several companies at once.

The government is looking to force consolidation by stating that the main default fund in a master trust should be at least £25 billion by 2030.

The aim is to create a smaller group of larger master trusts that can then help fund UK economic projects.

This is inspired by the success of superannuation schemes in Australia, where the largest providers have assets worth hundreds of billions.

In contrast, big multi-employer schemes in the UK such as NEST have assets of £50 billion.

But the report warns that the overall impact may be marginal given that the DC master trust market is already relatively concentrated.

It adds that it takes time to build scale and the mandatory Australian system has been around since the 1990s, while auto-enrolment and the rise of DC schemes only started in the UK in 2012.

Webb said: “We need to move away from spurious comparisons with the pension systems of other countries when deciding what is right for the UK.

“The Australian DC system in particular is currently far larger and far more mature than the UK system and this will inevitably lead to a different investment mix compared with the UK’s smaller master trust sector.”

Investing in private markets

The legislation includes a reserve power for the government to mandate how master trusts invest, with an aim to boost private UK investment markets - known as productive finance.

But the report warns that smaller pensions face barriers to being able to do this due to a lack of public information .

The paper argues that there is no clear case either for the government to override the judgments of trustees acting in the interest of members or for setting arbitrary top-down targets.

Webb added: “The UK investment mix will in any case shift rapidly in the coming years, as UK DC schemes grow rapidly, and the government should not be in the business of over-riding trustee decisions to impose what it thinks is the right answer.”

Value for money framework

The Financial Conduct Authority (FCA), the Department for Work and Pensions (DWP) and The Pensions Regulator (TPR) have published proposals aimed at encouraging workplace pension schemes to improve their performance.

Under the proposed changes, pension schemes will need to publish clear data on their performance, costs and quality of service based on a ratings system giving each a Value for Money score.

If a pension is deemed to offer poor value, firms and trustees must then fix it by moving staff to better schemes or by making improvements.

But the report warns that ‘league tables’ could be counterproductive, leading to ‘herding’ of investment strategies with schemes reluctant to step away from the pack’ and innovate.”

Paul Johnson, senior adviser at Frontier Economics, said: “We need a rigorous framework to assess value for money, making sure that interventions are laser-targeted on areas where market forces alone will not deliver the right outcomes.

“The appropriate interventions will depend on the specific market failures we need to tackle and not on some arbitrary top-down target.

"Governments should act with great humility for fear of reducing the value of people’s pensions.”

Steve Webb was a guest on the MoneyWeek Talks podcast, where he discussed the state pension triple lock, using pensions for property, and more.

Pay into a pension as early and for as long as possible is the standard advice. But for those of us able to take that route, is it still worth paying into a pension as we get close to retirement? What are the benefits of pension saving into your 60s? Is it worth it at age 70?

These questions have become more complicated by the government’s decision to include pensions in inheritance tax (IHT) calculations from April 2027.

Currently, unused pensions are not subject to inheritance tax, and paying in extra to boost pension savings has been also used as a way to reduce the inheritance tax bill your loved ones receive when it comes to passing on wealth. From next April, pensions will no longer be a viable way to avoid IHT.

Even beyond inheritance tax considerations, when working out how much you need to retire, is there really much gain to be had from paying into a pension just a few years before you need to spend it?

Sue Allen, chartered financial planner at wealth manager Chester Rose, said: “This should be considered in the context of your financial plan – do you need to save more? If you have enough, you may as well enjoy it. Life isn’t a dress rehearsal.”

However, if you are in a position where you could save more into your pension, but are on the fence, you might be swayed either way by seeing some cold, hard numbers. Wealth adviser Chester Rose has conducted exclusive analysis for Moneyweek to test the benefits.

We also compare an ISA vs pensions for retirement saving in a separate article.

Pension tax-free cash

A big benefit of pensions is that they allow you to build up a significant tax-free cash lump sum – the lump sum allowance (LSA). This is set at 25% of the pot you are ‘crystallising’ (taking benefits from) up to a maximum amount of £268,275.

To reach this maximum tax-free cash, you would need an overall pension pot of £1,073,100.

Simply put, if you still have some allowance left in your 60s – that is, you have a pension pot of less than £1,073,100 – then you can build up tax-free cash. Money you will not pay tax on when you come to withdraw it.

“That must be attractive. We don’t have many tax perks left in the UK, but this is certainly one of the best,” said Allen.

Pension tax relief vs marginal pension withdrawal tax rate

When it comes to paying into your pension during your 60s – likely to be your peak earning years – it is also worth considering the difference in the tax you pay now versus the income tax you may pay in future.

Most people have a personal allowance of £12,570 with zero tax on income at this level. Then, from this amount up to £50,270, you pay basic-rate tax at 20%, not including National Insurance Contributions. Over this, you are paying 40% and over £125,140, you’re paying 45%. (Though thanks to a quirk in the tax laws, people earning above £100,000 pay an effective 60% income-tax rate on part of their salary.)

You get tax relief on pension contributions at your current marginal income tax rate (up to the £60,000 annual allowance).

If you are a higher- or additional-rate taxpayer now and expect to be a basic-rate taxpayer in retirement, then putting money into a pension and getting 40% or 45% tax relief now, and only paying 20% income tax at a later date, is a decent strategy.

“What’s even better is if you took a pension income using part tax-free cash, then your effective tax rate is actually 15%,” Allen pointed out.

How much could my pension still grow in my 60s?

A key consideration when evaluating whether to continue contributing to a pension in your 60s is the growth factor – specifically, how much your pension might increase from, for example, age 60 to a retirement age of around 68. Chester Rose crunched the numbers on this.

For simple maths, let’s consider the value of £1 invested in a pension (a gross, i.e. before-tax, contribution) with an assumed growth rate of 5% and not taking into account inflation.

By Chester Rose’s calculations, that £1 would grow to £1.4775 over eight years (from age 60 to age 68, at a 5% growth rate).

Now we need to multiply this by the average pension pot of a 60-year-old. According to average pension data by age, someone in the 55-64 age bracket has an average pot of £137,800.

From age 60 to age 68, based on that same growth rate, this pension could increase from £137,800 to £203,600. That is a 47.7% increase. So clearly, there is sizable growth potential even without any further contributions.

However – from the same starting point, £137,800, and same 5% growth rate – but with an added £500 a month in gross pension contributions from age 60 to age 68, the pot could be boosted further to £263,752, by Chester Rose’s calculations. That’s a 91% increase on the original starting pot (including your contributions).

What about inheritance tax?

Now, you may well be thinking, what is the point of all this diligent pension saving, if it is going to be taxed when I die (from April 2027).

Consider this: you already have an estate that exceeds both the inheritance tax-free threshold (also known as the nil-rate band, currently £325,000 per person) and the residential nil rate band (an additional £175,000 per person). Essentially, this means assuming your loved ones will pay 40% IHT on your unused funds upon your death, whether in a pension or an ISA. Which makes you better off?

So, let’s assume you put £10,000 in the pension at age 70 and it grows at 5% per year. You then die at 100.

The calculation is complex, but the result is that £10,000 increases to £42,219, according to Chester Rose’s figures.

Your loved ones then pay inheritance tax at 40%, leaving £25,931 after tax to pass to beneficiaries, so £16,287 in IHT is paid.

Now let’s assume instead that you pay tax at the basic rate (20%) and put that £8,000 (£10,000 after 20% tax) into your ISA at age 70, and then leave it until age 100.

It grows from £10,000 to £34,575. Your loved ones pay £13,830 tax upon death, so you have £20,745 to pass to beneficiaries.

“So yes, you paid more inheritance tax by investing in the pension option – but the amount to pass to beneficiaries is still larger, at £25,931 versus £20,745 – a difference of £5,185.65,” Allen, from Chester Rose, said.

Is it still worth paying into a pension at age 60?

The figures speak for themselves – growing cash gross in a pension can significantly boost your wealth, even from age 60.

“Recent government changes have certainly made pensions less attractive as a wealth transfer tool. However, do not let that obscure what it is – a very efficient way to save, even in later life,” said Allen from Chester Rose.

However, something to remember is that turning 75 acts as a major tax milestone for private pensions, ending tax relief on contributions and changing death benefit taxes.

After 75, you can no longer get tax relief on personal contributions, though employer contributions may continue. Also if you die after age 75, your beneficiaries usually pay income tax on inherited pensions, and from 6 April 2027, these will be included in the estate for inheritance tax.

As always, the general advice to get the most bang for your buck with pension saving is to start as early as possible. And if in doubt, speak to a financial adviser.

One million more pensioners will need to pay income tax in 2031, a new forecast suggests, due to successive freezes to tax thresholds.

The number of pensioners paying income tax will rise by 600,000 to 9.3 million in 2026/27, according to the Office for Budget Responsibility (OBR), from an expected 8.7 million in 2025/26.

In 2030/31, one million extra pensioners will be dragged into the taxman’s net, based on the fiscal watchdog’s latest forecasts for the UK economy published alongside the Spring Statement on 3 March.

The jump comes as incomes rise, in part due to the state pension increasing under the triple lock, but tax thresholds remain frozen until 2031.

The OBR said many of the one million people who will be pulled into the tax net in 2031 will pay “very small additional amounts” to HMRC.

Meanwhile, the chancellor Rachel Reeves has said there will be a workaround for pensioners whose sole income comes from the state pension who are expected to pay income tax from 2027.

HM Treasury is expected to set out more detail on how this exemption will be administered later this year.

Why more pensioners are paying income tax

Pensioners have seen their state pension steadily rise under the triple lock mechanism since it came into effect in April 2011.

The mechanism sees the state pension increase by the highest figure out of 2.5%, inflation (CPI) or average earnings growth.

In April 2026, the state pension will rise by 4.8%. It means the full new state pension will increase from £230.25 a week now to £241.30 per week from April 2026.

However, the tax-free personal allowance (£12,570) and income tax thresholds have been frozen at their current levels since April 2021 and will remain there until 2031.

As people’s incomes increase, in part for pensioners because of a higher state pension, more of their money is liable for tax. The process is known as fiscal drag and has been described as a “stealth” tax as people slowly pay more tax as their incomes rise with inflation.

Around 8.3 million people of state pension age paid income tax in 2024/25, up from 5.9 million in 2011/12, according to the latest HMRC data.

How pensioners could reduce their tax bill

If you’re one of the millions of pensioners currently paying, or expected to pay, income tax on your income, there are ways to mitigate the blow.

Defer your state pension

One option is to defer your state pension. For every nine weeks you defer, your state pension is boosted by 1% when you come to actually claiming it. This is if you reached or will reach state pension age on or after 6 April 2026.

You have to defer for a minimum of nine weeks to get any top up.

Delaying taking your state pension can be useful for tax purposes if you are still working and claiming it were to take you over certain tax thresholds.

You could then claim it when you are no longer working and your taxable income is lower.

Just bear in mind that deferring your state pension can reduce the amount you receive from government benefits.

Use your tax-free cash wisely

You can take 25% of your private or workplace pension as a tax-free lump sum, capped at a maximum of £268,275, from the age of 55 (57 from April 2028).

But you don’t have to take it out all at once and can take it in chunks over time. For example, you could use it to supplement your taxable income meaning mean you pay less tax overall.

“You can use the tax-free cash from your pension to supplement your taxable income,” said Helen Morrissey, head of retirement analysis at investment platform Hargreaves Lansdown.

Make the most of ISAs

You could top up your taxable income with cash withdrawn tax-free from an ISA.

If you are still earning money and want to stash some away, it’s worth adding it into an ISA as well.

Money held within a taxable savings account is subject to the personal savings allowance (PSA) which sees you taxed on interest earned over certain thresholds. Basic-rate taxpayers can earn £1,000 in savings interest tax-free, while the allowance is £500 for higher rate taxpayers. Additional rate taxpayers don’t get a PSA.

Spread savings or investment income with a partner

You may be able to spread income from savings or investments between you and your partner to lower your overall tax bill. This is particularly helpful if one’s income is much higher than the other’s.

Adam Cole, retirement specialist at Quilter, said: “Couples can often reduce the overall bill by shifting savings or investment income towards the lower‑earning partner.”

One allowance you can utilise is the marriage allowance which lets you transfer £1,260 of your personal allowance to a higher-earning partner to reduce their tax bill.

To qualify, the lower earner must normally have income below the personal allowance and their spouse or civil partner must be a basic rate taxpayer.

Growing evidence is suggesting pensioners with larger defined contribution pension pots are starting to run them down much faster – or use them up in full – in a bid to reduce potential inheritance tax (IHT) liabilities.

From April 2027, unspent defined contribution pension pots will be added to the value of the estate when inheritance tax is worked out. Likewise certain defined benefit death benefits such as ‘death in deferment’ lump sums. The changes were announced in the 2024 Budget.

The government estimates the move will bring around 10,000 estates each year into paying inheritance tax for the first time as well as increasing IHT bills for a further 40,000 estates.

But the long gap between the announcement of the change and it being implemented has given wealthy pension savers and their financial advisers time to put in place a range of strategies to offset the impact of the move.

This impact is most likely to be seen with larger pot sizes where the inheritance tax risk is greatest.

Steve Webb, partner at pension consultants LCP and a former pensions minister, said: “For many years, one of the attractions of defined contribution pensions has been their favourable treatment under inheritance tax rules, especially for those with larger pots.

“But the 2024 Budget announcement has changed things, and people with larger pots are now exploring a range of strategies to reduce any potential IHT bill for their heirs.”

What are pension savers doing to avoid inheritance tax?

Pension savers are increasingly turning to two financial products – annuities and whole of life insurance policies – to help them overcome the fact pensions will be subject to inheritance tax from April 2027, Webb says.

Annuities

Annuities allow savers to convert some or all of their defined contribution pot into a lifetime income stream. This income can be potentially gifted using the “normal expenditure from income” exemption.

Provided the rules are followed, these gifts can immediately be exempt from IHT.

If a joint life annuity is bought, then this carries on after the death of the first person. This is free from inheritance tax for the second life, even if the couple aren’t married or in a civil partnership.

There has recently been a surge in annuity purchases bought with larger pension pots. Sales of annuities over £250,000 rose by 31% year-on-year in 2025, and sales of annuities valued at over £500,000 rose by 54%, according to data from the Association of British Insurers (ABI).

In the case of an annuity, those in poorer health will generally get a better rate, as the annuity will pay out for a shorter period.

Whole of life policies

With ‘whole of life’ insurance policies, savers can pay for regular premiums for a policy which pays out a guaranteed lump sum when the saver dies. These payouts are free of inheritance tax, provided the policy is set up under a trust.

Alternatively, this lump sum could pay for any inheritance tax bill.

In the case of a couple, the policy can be set up to pay out on the ‘second’ death, meaning that it pays out only at the point the estate passes between generations. This reduces the cost of the policy. Doing it this way is known as a ‘joint life, second death’ policy, and typically applies for deaths up to age 90.

Industry sources suggest a surge in demand for whole of life policies, with an increase of 92% year on year reported in Spring 2025.

The terms for whole of life policies will generally be better for those in good health, because the premiums will run for longer and the expected payout date will be later.

Webb said: “Defined contribution pension providers can expect to see changing behaviour amongst savers with the largest pots, with more interest in drawing down more rapidly for gifting or purchase of a whole-of-life policy, or even using the whole pot for annuity purchase. Providers may find that the largest pots disappear the quickest post-retirement.”

Annuity or whole of life policy – which is best to avoid inheritance tax?

Financial advisers will be able to recommend the right strategy for each individual, but according to Webb, factors which pension savers are likely to consider if deciding between an annuity or a whole of life policy include:

Timing: With the annuity option, the pension saver is ‘giving while living’ – passing on regular income immediately to heirs. By comparison, a ‘whole of life’ policy delivers a lump sum on death.

Health: Those in poor health could potentially get favourable annuity terms, though risk giving up their capital for a relatively limited payout period. Meanwhile those in good health could get favourable terms from a whole of life policy, especially one which only paid out on the ‘second death’ in a couple.

Adjusting for inflation: Whole of life premiums can be fixed in cash terms, providing assurance the policyholder can keep up the payments for life, or can be set to increase, thereby helping to maintain the real value of the eventual payout.

With both a whole of life policy and an annuity, the policyholder will need to keep records so their heirs can demonstrate ‘where the money went’ while the saver was alive, to ensure HMRC do not attempt to add the money gifted (or spent on premiums) back into the estate after death.

Clare Moffat, pensions and tax expert at Royal London, said: “It is clear that there is growing interest for clients who might be affected by IHT in financial products such as annuities or whole of life policies. But the options are complex and it may be worth an inheritance tax bill if that makes family members better off.

“Most people would benefit from taking professional financial advice so they can work out the best course of action for their specific circumstances.”

We look at how to navigate the inheritance tax paperwork maze in nine clear steps in a separate article.

Savings accounts have battled their way back onto Brits’ radar, offering attractive rates to beat the Bank of England’s base rate and inflation. But when it comes to getting more bang for your buck, they have some stiff competition from tax-efficient pensions, for those who already hold an emergency savings pot.

Inflation is slowing, with the latest data for January putting CPI inflation at 3%. Consequently, the Bank of England is gradually reducing the base interest rate – it is currently 3.75%, with the next BoE decision due on 19 March.

The best cash savings account rates are currently around 4.5%, and many households feel they are finally being rewarded for holding cash.

However, for higher- and additional rate taxpayers, a significant portion of those gains can disappear once tax and inflation are factored in, according to new analysis from Standard Life.

Even at inflation-beating best buy rates, higher rate taxpayers could lose over two-thirds of their savings gains to HMRC and the creeping increase in the cost of living, the number crunching found.

Mike Ambery, retirement savings director at Standard Life, said: “Higher interest rates can lull people into thinking their cash is working harder than it really is.

“Frozen income tax thresholds are pushing more people into higher income tax brackets each year and the amount of interest lost to tax could come as quite a surprise, especially with inflation to consider too.”

Bear in mind, in this article we are assuming you already have a healthy emergency savings buffer of between three and six months outgoings, which is what the experts recommend.

The impact of tax on savings

Many savers make use of ISAs to keep all of the gains they make from savings interest. But those who have already used the full £20,000 annual ISA limit and are now holding cash in taxable savings accounts, may face a much larger bill than expected due to the savings tax trap.

With income tax bands frozen until 2031, more people are moving into higher and additional rate brackets each year – in what’s known as fiscal drag – making tax on interest a growing issue for households who may not realise they’re affected.

Once your savings interest exceeds tax-free allowances, it is taxed at your marginal income tax rate, so 20% for basic rate taxpayers, 40% for those in the higher band and 45% for additional rate taxpayers. From April 2027, this jumps to 22%, 42% and 47% respectively.

Higher rate taxpayers only need around £11,000 in a non-ISA cash account earning 4.5% interest before their £500 personal savings allowance (PSA) – the amount of savings interest they can earn tax-free – is used up and interest begins to be taxed. Even before inflation is considered, this reduces returns significantly.

For higher rate taxpayers with larger amounts held outside an ISA in taxable accounts, the benefits of even the best buy cash savings rates are eroded away further by tax and inflation.

For a higher rate taxpayer holding £30,000 in a taxable savings account, for example:

• £1,350 interest is earned at a 4.5% rate
• After the personal savings allowance is used up and tax applied, this falls to £1,010
• After allowing for 2% inflation, the real gain is just £402

Basic rate taxpayers, who have a bigger £1,000 personal savings allowance, need around £22,000 in a top rate savings account to incur a tax bill. By comparison, additional rate taxpayers pay tax from the very first £1 of interest because they have no PSA at all.

The impact of tax relief on pensions

On a purely numbers basis, when measuring the gains on savings accounts next to pensions, there is really no competition – although you must be willing to lock your money away for a long time.

Pension contributions are one of the most tax-efficient ways to save, for those able to take a longer-term view with their money.

Higher and additional rate taxpayers, in particular, benefit from higher tax relief, giving their contributions a significant immediate boost.

For example, the same £30,000 invested into a pension could lead to a gain after one year of £21,103, according to Standard Life analysis, assuming 5% annual investment growth, 40% tax relief on the whole £30,000 and allowing for 2% inflation.

This is more than 52 times greater than the returns on a taxable cash account, and without any immediate income tax bill.

Pensions are usually taxed as income as they are withdrawn, beyond the 25% tax-free lump sum.

Source: Standard Life. Inflation calculated on the value after tax on interest and charges for taxable cash account and ISA, and after tax relief, investment growth and charges on the pension. Up to £20,000 each year can be deposited in an ISA.

Ambery, from Standard Life, said: “While ISAs are a solid tax‑efficient option, pensions are where the tax system truly works in your favour. For a higher‑rate taxpayer, a qualifying £30,000 contribution can instantly become £50,000 through tax relief. If you’re planning for the long-term, that head start is incredibly difficult for cash savings to compete with.”

Pensions vs savings: Which is best for my money?

The quick answer is a pension will give you a much higher return on your money than even large sums in some of the best paying savings accounts – although you won’t have access to it in the short-term. But the real answer is, if you can, have both.

A savings account might work better for you if you need access to your cash quickly, for example if it is where you keep your emergency fund. By comparison, pensions are savings for the long term, so you’ll need to be willing and able to tie your money up until at least age 55 (rising soon to 57) before you reap the benefit.

Women, the self-employed and carers have emerged as the most disadvantaged when it comes to pension saving, according to a government study.

The pension gender gap and a lack of retirement provision for the self-employed and carers is well-known but an official government study has highlighted the real impact on people.

The study followed the lives of 17,415 babies born in England, Scotland and Wales in a single week in March 1958 – part of the post-war baby boomer generation – following them up a further 11 times, most recently at age 62 as they prepare for retirement.

The findings highlight the factors that can influence a comfortable retirement and it comes as the government revived the Pensions Commission to look at boosting saving for people’s golden years.

Data from Pensions UK shows the cost of a comfortable retirement is £43,900 per year, but official figures show it is difficult for many to achieve this sum.

Here is what the baby boomer study showed about pension saving.

Are baby boomers ready for retirement?

Many of this group grew up and had their careers before auto-enrolment, and some will have benefited from the rise of defined benefit (DB) schemes rather than the now dominant defined contribution (DC) products.

Half had a total expected pension income which was less than their target retirement income, the study shows. This decreased to 43% when financial wealth such as the value of other savings was included.

The study found that 78% of study members have a private pension.

One in three have a DB pension and one in two a DC pension but there are gender disparities.

More women than men have a DB pension at 37% to 33% and more men than women a DC pension at 55% to 39%.

However, on average. the value of a DB pension for men is twice the value for women at £13,900 compared with £7,500.

The value of a DC pension for men is also around three times the value for women at £90,000 to £28,500.

It is more tough when it comes to being self-employed though. The data shows that this cohort are three times more likely to not have any private pension at 29% to 10% and are almost four times less likely to have a DB pension.

How people are accessing their pension

One in four study members had fully retired by their early 60s and were more financially advantaged compared to their peers in paid work.

Three-quarters of those with a pension have already accessed or intend to access one of their private pensions before state pension age, the research shows.

This was higher for those with a DB (84%) than a DC (66%) pension.

Of those that had accessed their DB pension, 85% had taken a lump sum in addition to their pension income.

Of those that had accessed their DC pension, almost two-thirds (63%) had withdrawn a tax-free lump sum.

Twice as many had taken an adjustable income than had purchased an annuity at 33% compared with 17%, the report said.

Meanwhile, 15% had withdrawn their entire pension fund in one lump sum. This figure was higher among women than men at 19% against 13%.

Among the study members who had accessed a private pension, those who had fully retired were more socio-economically advantaged than those who remained in paid work, the research showed.

Most owned their own home outright, had a degree, weren’t divorced and had savings of £100,000 or more.

State pension awareness

The state pension may have got more generous in recent years, especially with the triple lock, but a lack of awareness and over-reliance remains.

The research showed that 80% expected to receive their state pension at age 66, suggesting 20% did not know the age when they would receive it.

Yet many are unsure of how much they will receive.

When asked to approximate the amount of state pension based on a range of values that were presented to them, 18% still reported they did not know.

Of those study members who gave an expected value, three in 10 gave a value between the average and full 2022 to 2023 state pension, 47% gave a figure below and a quarter above the full new state pension.

The report estimates that one in two study members would be mostly reliant on the state pension.

It said those who we estimated to be mostly reliant were women, those with lower education levels, divorced or single, rented their home, were self-employed, in a home-care role or not in paid work due to poor health as they had fewer options to build up personal pensions.

What the study means for pension reform

Patrick Thomson, head of research analysis and policy at the Standard Life Centre for the Future of Retirement, said the analysis lays bare the scale of the challenge for the Pensions Commission.

He said: “A lot of the assumptions that our current pension and retirement system are built on are designed for people like those born in 1958 – 63% are married and 61% own their home outright.

“Retirees of the future will look markedly different, with more people privately renting, needing to balance their work and home lives, and facing uncertain care costs. We need a system that works for the realities of the way we live today.

"These findings highlight how crucial it is for improvements to be made to pensions adequacy alongside increasing participation among underserved groups. This means supporting people to stay in work for longer and helping them make the most of the savings they do have, for example through initiatives such as Targeted Support. The Pensions Commission will need to confront these structural gaps if future generations are to achieve genuinely secure and sustainable retirements.”

Kelly Parsons, head of DC proposition at pension consultancy Broadstone, said the next phase of reform needs to focus on contribution adequacy and targeted engagement with groups at the greatest risk of poorer retirement outcomes.

She said: “For employers, this is also a workforce issue. Better scheme design, more inclusive contribution structures and support around life events such as parental leave can make a meaningful difference. Without coordinated action from policymakers, employers and the industry, today’s imbalance risks becoming tomorrow’s retirement inequality.”

If you’re worried having several pensions scattered across multiple providers could mean you lose track of them, or cost you more in fees, you may want to consider consolidating your retirement pots.

But what is pension consolidation, and should you do it?

Pension consolidation just means bringing together multiple defined contribution pensions (there are different rules for defined benefit pensions) into one single pot with one single pension provider. This can be done in one of two ways: moving your other pots into one pension you already have; or moving all your pots into a new pension with a new pension provider.

Pensions are a standard work perk in Britain today – usually with every new employment comes a new workplace pension into which staff are automatically enrolled. Older workers who have been in the workforce for decades can have half a dozen pensions floating around.

Having a large number of pensions can mean doubling or tripling up on admin and costs, and mean you lose sight of investment performance. Pension consolidation is a potential solution – but it’s not right for everyone.

Why would I consolidate my pensions?

Savers considering pension consolidation are typically looking for a solution to a couple of problems:

1. They have too many pensions to comfortably keep track of. Some may even be ‘lost’.
2. They are paying unnecessary fees to pension providers because they have multiple pots all doing similar things (like being in similar default funds) but paid for separately.

Maike Currie, vice president of personal finance at PensionBee, a firm which provides pension consolidation services, said: “One of the strongest arguments for consolidation is the prevention of ‘lost’ pensions. Although it’s fair to say that often pensions aren’t necessarily ‘lost’, they’re simply scattered and often ignored.”

At least 4.8 million pension pots are currently considered ‘lost’ in the UK, according to research by PensionBee, with nearly one in 10 workers believing they have misplaced a pot worth more than £10,000.

That fragmentation can make it hard to keep track of how much you’ve saved, how your investments are performing and how much you are paying for that performance.

“Consolidation brings those pots together into one place, giving you a much clearer picture of how much you’ve saved and making it easier to engage with your retirement plans. It also helps reduce the risk of pensions genuinely being forgotten altogether,” said Currie.

Pros and cons of consolidating pensions

Here’s a quick run down of the main benefits and risks of consolidating your pensions from pension consultancy LCP.

Pros

1) Lower charges – many pensions taken out before automatic enrolment will have much higher charges, whereas under auto-enrolment the fees for modern workplace pensions are capped at 0.75% or less.

2) Better value when buying an annuity – one big pension pot can buy a better value annuity than lots of smaller pots

3) Rationalising your investment strategy – with scattered pots, it is almost impossible to be clear how your money is invested and to ensure you have the right level of risk and return for your individual situation.

4) Easier to manage the pension paperwork – this will become more important once unused pensions are included in inheritance tax calculations from April 2027

5) Benefiting from the latest investment innovations – many old pots may be invested with a UK bias or may not take advantage of asset classes which have become more mainstream in recent years.

Cons

1) Giving up valuable product features of old pensions, including ‘guaranteed annuity rates’ (GARs), which promise an often attractive annuity rate compared with current market rates – a feature which may be lost on transfer.

2) Lack of diversification of pension provider and potentially fund manager

3) Giving up ‘small pot privileges’ such as the ability to access pots under £10,000 without triggering the ‘money purchase annual allowance’ – a tight limit on tax-relieved future pension saving.

4) Giving up on other ‘protected’ features of your old pension, such as higher rates of tax-free cash (on older pension policies) and the ability to access it before the proposed normal minimum pension age of 55 (rising to 57 by 2028). You should always seek professional financial advice should you feel any of your policies could contain these.

5) Risk of exit charges to leave your old pension. The cost of transferring varies between providers. Exit fees are capped if you are close to retirement, so in a lot of cases, the exit costs do go down with time and may not apply anymore to your policy.

Will consolidating my pensions save me fees?

While savings vary, consolidating your pensions can reduce duplicated charges. Over decades, even a small fee difference can translate into thousands of pounds more in retirement savings. Currie, from PensionBee, gave the following example:

Imagine someone has four separate pension pots worth £10,000 each (£40,000 in total). Each older scheme charges around 1% a year in fees. At 1%, they would pay about £400 a year in total charges. If they consolidated into a single lower-cost pension charging 0.5%, annual fees would fall to around £200 a year – a 50% saving.

Currie said: “Here’s the rub: Pensions are the ultimate long term investment where the power of compound interest really comes to the fore and the real impact of this saving will come from compounding over many years.”

For example, over 25 years, assuming 6% annual investment growth (in line with what the MSCI global index has returned over the long-term) staying in the four higher fee pots (£40,000 saved in each) could leave you with a total pension pot of about £135,500 by PensionBee’s calculations (a net return of 5% with 1% in fees deducted).

However, consolidating your pots into a lower-fee plan charging 0.5%, the net return will be 5.5% a year, which could result in £40,000 roughly turning into a total of £152,400.

“That’s a difference of around £15,000 over 25 years, simply from lower charges – without contributing an extra penny,” Currie explained.

Also, with some pension schemes, when the fund value of the pension goes above a certain amount, you receive a discount on your whole pension, which you may not qualify for if you spread the contributions across different providers.

How will consolidating my pensions affect my investments?

One of the main misconceptions about transferring all your pensions into one is that you will reduce your investment diversity, which is not necessarily true.

If you look at and compare all of your pensions you might find they’re not diversified at all currently, because they’ve stayed in the ‘default’ funds offered by each provider and these are often very similar – for example, they might be all UK funds.

By comparison, if you find a new provider with a good selection of funds, you can have a range of investments all held within the same pension plan.

Also when pensions are consolidated into one, monitoring investment performance can be much simpler. Pension providers tend to report past performance in different ways and times – one may come at the beginning of the year, another in the middle and the other at the end. If you have one pension, you know every time where you stand and how it is performing.

Another investment issue to consider is whether your current policies are still right for your risk profile and risk tolerance, which can change over time. If your pensions are all in one place, it can help you to more clearly see if the underlying investment strategy is still suitable for you.

This is crucial to review at least every three years, and you may now find that your old pensions are invested in portfolios that are now too low or high risk for you.

Different pension providers offer different strategies – some might have 10 options while others might have many more to choose from. It’s about understanding what the right investment option for you is and then consolidating your pension savings into the right strategy.

Flexible pension options

You may want to transfer your pensions in order to give yourself greater choice and flexibility with your retirement savings. Some pension schemes which were established before 2015 (prior to the pension freedoms rules) may not have the flexible options that other newer pensions have.

Income drawdown (also known as flexi-access drawdown) came into effect in 2015 and it allows you to access your pension savings whenever you need to from age 55, while reinvesting your remaining funds in a way that is designed to provide an ongoing retirement income.

If you retain an older pension, when the time comes for you to access it, you might have to transfer it anyway to another one in order to receive the benefits you are looking for, like flexi-access.

Pension consolidation and retirement goals

As you’ll only receive statements for one plan, record keeping becomes much easier. This is particularly useful if you want to make a large, one-off contribution and to make use of your pension carry forward allowance to mop up any unused allowances from the previous three years.

It can end up being quite a mammoth task if you have a multitude of pensions that you’ve been contributing to, because you have to contact each provider for information and, basically, you’ll be held back by the slowest one of them.

Finally, consolidating your pensions into one policy, where appropriate, and even just beginning this exercise of reviewing each of them, will enable you to have a far clearer picture and understanding of what you have built up so far, what you may need to continue to save and all your income options in retirement.

Camilla Esmund, senior manager for consumer campaigns, financial education and retail investment analysis at Interactive Investor, said: “Having everything in one place makes it easier to know where you stand, if you're saving enough, and whether you're on track for the retirement you want.”

You may even find you can retire earlier than you thought.

Is pension consolidation right for me?

The main aspect to consider during the review of your pensions and any before consolidation is what might be lost – as this can outweigh what you gain in lower fees and simplification.

Some older pension policies could have valuable guarantees, such as a guaranteed minimum pension or protected higher tax-free cash percentages. These could be lost on transfer.

If your old pensions don’t have any of these guarantees, however, consolidation could be right for you as a way to keep track of your retirement pot, keep costs down and flexible options open.

Currie from PensionBee said: “Consolidating pensions can be a powerful way to simplify your financial life – giving you a sense of control and clarity. Bringing scattered pots into one place makes it easier to see how much you’ve saved, and how your underlying investments are performing. It can also potentially reduce duplicated fees so more of your money stays invested.

“Of course it isn’t a one-size-fits-all solution. Some older schemes come with valuable guarantees that could be lost on transfer, and defined benefit pensions in particular often offer benefits that are hard to replicate elsewhere. The key is always to weigh up convenience and cost savings against what you might be giving up.”

As always, it is best to seek professional financial advice to understand all your options before making any large financial decisions.

Annuities are back. The pension-freedom reforms of 2015, which made it much easier for savers to withdraw retirement income directly from their pension fund, were supposed to destroy the annuities market.

But a decade later, annuity sales are surging. The Association of British Insurers says pension savers bought £7.4 billion worth of them last year, 4% more than in 2024, and annuities are attracting growing numbers of savers with larger funds.

It wasn’t supposed to be this way. Annuities are a relatively inflexible product. They convert your pension savings into a regular income, guaranteed for the rest of your life, but you’re locked into the prevailing rates at the time of your retirement.

There is no scope for further investment growth and you don’t have pension assets left over to bequeath to your heirs.

By contrast, in an income-drawdown plan, you can continue to invest your pension fund while taking cash out of it to live on, and any funds left over when you die can be passed on. However, three factors explain why more savers are now rejecting drawdown and returning to annuities.

Why are retirees returning to annuities?

First, annuity rates have become much more generous over the past few years, largely because they’re closely linked to interest rates and gilt yields, which have trended upwards.

A £100,000 pension pot would now buy a 65-year-old man around £7,700 a year of annual income, assuming he’s in good health.

That compares with just £4,900 a year five years ago, when annuity rates hit a low.

Second, the increased uncertainty of the economic and political environment is even more unsettling if you’re managing a pension fund later in life.

With drawdown plans, you’re constantly trying to work out how much income you can withdraw while being confident your money will last for as long as it needs to.

Since you don’t know how long you’ll live or what returns your pension fund will achieve, that’s a difficult task. And in volatile times, it feels even more daunting.

Annuities, by contrast, provide certainty and security.

Factor number three is the changing rules on inheritance tax.

Right now, pension assets bequeathed to your heirs don’t usually count towards the value of your estate for inheritance tax (IHT) purposes. But from April 2027, that will no longer be the case.

As a result, your generous bequest of pension assets could actually mean you’re leaving your heirs with an IHT headache.

In which case, an annuity, where you’re not passing on unused cash, may be a better option for all concerned.

Against this backdrop, many more savers are attracted to annuities – including wealthier savers who would previously have been considered prime candidates for income-drawdown plans.

It also helps that providers have become more innovative, designing new types of annuity that tackle some of the problems historically associated with the products.

Still, it’s more important than ever to follow the golden rule with annuity purchases: never simply buy the annuity on offer from the pension provider where your savings are invested.

Rates vary enormously from one provider to another – and, increasingly, so does the design of the product.

Taking financial advice on an annuity purchase can make a huge difference to your retirement income.

A specialist will help you find the most competitive rates but also advise you on the right type of annuity.

For example, people seen as in less good health may qualify for higher rates from some providers – that could simply mean you’re a little overweight or have smoked in recent years, or even that you work in a profession considered riskier.

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Automatic enrolment (AE) into workplace pension schemes has transformed retirement saving for good.

After it was introduced in 2012, the percentage of all employees joining their workplace pension scheme rose from under 50% to over 80% by 2024, according to the Department for Work and Pensions.

The number of members has increased from 11.6 million to 23.3 million.

Yet many savers will have little idea how their money is invested. What arfe the default pension funds? Why were these funds chosen? What do they charge?

Of course, it’s vital not to intimidate savers who know little about pensions and to make it easy for them to save for retirement.

But it is also preferable to give experienced investors enough information and choices to let them make their own decisions.

On this front, many pension schemes could still do a lot better.

Default pension funds can be unduly conservative

Let’s take Nest, which was set up by the government specifically to facilitate auto-enrolment and now holds roughly £50 billion in assets.

Nest offers six strategies, but says that over 99% of its members are in one of its retirement-date funds.

With a retirement-date fund – also known as a lifestyle fund or a target-date fund – your asset allocation depends on your age.

The strategy will shift your money from high-growth assets such as stocks to lower-risk assets such as bonds as you get closer to retirement.

Consider the Nest 2045 Retirement Fund, since this is in what Nest calls the “Growth Phase”, which implies a high allocation to equities.

Its largest holding is the UBS Nest Climate Aware Equities Strategy, at 43%, and it also has 5.1% in the Northern Trust Nest Climate Aware Emerging Market Equities Strategy.

Both are benchmarked against indices with environmental, social and governance (ESG) criteria (eg, they may exclude fossil fuels or other sectors such as tobacco).

In total, that’s 48.1% in broad equities, while 29.6% is in bonds and cash and the rest is in alternatives – property, infrastructure, private equity, private credit and so on.

For investors that don’t plan to retire for 20 years, this is a conservative asset allocation, yet also a complicated one, with various small allocations to alternatives.

While some risk-averse investors will be happy, others would rather be in a low-cost 100% global equity fund with no ESG mandate. This is a basic product, yet Nest does not offer it as a choice.

It seems fair to ask whether it is really earning a 1.8% initial fee and 0.3% annual management fee.

Review your default pension funds

Many other providers offer a wider range of funds to let you customise your portfolio, yet these are often surprisingly hard to use.

Scottish Widows offers an especially bewildering array of funds with different strategies in different series and different charges.

Fees for some of these are still over 1%, which is high for a large pension scheme that should have economies of scale.

Yes, dig in and you can find the Scottish Widows Global Equity CS8 tracker with an annual cost of just 0.1%, plus a range of other trackers – eg, US, UK, Europe, Japan and emerging markets.

But getting to grips with this may be painful enough to put many people off.

To be fair to Nest, default pension funds elsewhere can be much worse. Take Legal & General’s L&G PMC Multi-Asset Fund 3, the default in many workplace pensions.

This is supposed to provide steady growth with lower volatility, but it has left a lot to be desired. It has a low allocation of 40% to equities, including just 8.5% to North American equities.

Over five years, it has made an annual return of 4.7% – poor compared with its benchmark the ABI Mixed Investment, 40% to 80% Shares, which returned 5.9%, let alone global equities.

This is a fine example of why investors should check how their pension is invested and whether the asset allocation, performance and fees really stack up.

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Pension savers keen to squeeze the most into their retirement savings have a few weeks left to take full advantage of all of the (increasingly rare) pension perks HMRC allows in the current tax year.

With income tax allowances frozen, and almost everyone paying more in tax as each year goes by, pension saving is one of the few ways to keep more of earned income and build wealth.

The current 2025/26 tax year ends on 5 April, resetting several allowances. Before then, savers and investors who can are wise to make the most of the available ways to shelter money from the taxman and boost their pension savings.

Mike Ambery, retirement savings director at Standard Life said: “There’s still a lot you can do to make the most of your pension allowance. Pensions are one of the most powerful long-term savings tools, and making full use of them can help ensure you don’t pay more tax than necessary and keep more of your income working for you.”

1. Work out (and use up) your pension annual allowance

An obvious one, but putting as much as you can into your pension each year is a big winner when it comes to boosting your eventual retirement income. The end of the current tax year is a good time to work out how much you have already paid in and how much more you could pay in – which can be tricky.

For most people, the maximum you can put into your pension each year and still get tax relief is the pension annual allowance. It is £60,000 or 100% or your relevant earnings, whichever is less. This includes contributions from you, your employer and third parties. Relevant earnings include all earned income but not pension income, dividends or most rental income.

But higher earners may have a tapered allowance, reducing to as little as £10,000 if adjusted income exceeds £260,000. While they may also be able to carry forward unused allowances from the previous three tax years, those caught up in these numbers should seek advice.

Emma Sterland, chief financial planning officer at wealth manager Evelyn Partners, explained: “If you think you’re subject to the taper but would like to maximise pension contributions for the tax year, then you really should speak to a financial planner because the calculations for adjusted and threshold incomes can be very involved – as can the possible steps to remain the ‘right side’ of such thresholds.”

Also if you’ve already accessed your pension, it’s important to be aware that the Money Purchase Annual Allowance (MPAA) may apply instead of your pension annual allowance, reducing the amount you can contribute to a pension to £10,000 a year while still receiving tax benefits.

Ambery said: “This is triggered when someone begins taking taxable income from their pension, so it’s good to know which allowance applies to you.”

2. Pay up to £220k into your pension using ‘carry forward’

Savers who are set to maximise their current year’s pension allowance and have money on the sidelines they want to put to good use – maybe you got an inheritance this tax year – can take advantage of what’s known as ‘carry forward’ rules.

This is where you can go back and use up any unused annual pension allowances from the three previous tax years.

Sterland, at Evelyn Partners, explained: “The annual allowance is £60,000 for 2025/26 and was the same in the previous two years, but for 2022/23 it was £40,000. That affords a theoretical maximum contribution of £220,000 that can be paid into a pension in this tax year for those entitled to four years of the full annual allowance, and whose relevant earnings in this tax year allow it.”

The end of the tax year is the perfect time to review your use of carry forward. But there are some rules and restrictions to be aware of:

• You must have first used up the current year’s allowance – so the first step is to get an accurate reading of this year’s contributions and take those to the limit.
• You will need to have had a pension in each of the three previous tax years but you don’t need to have made any contributions and your new contributions do not have to be made into the same pension.
• Once the current year allowance is fully utilised, allowances from the ‘oldest year’ of the previous three are used up first and at the end of every tax year, the oldest year falls away. Therefore, any allowances not used from the oldest year – now 2021/22 – will be lost for good if they are not carried forward.
• To get tax relief on pension contributions that you make yourself, you need to ensure that the payments made in any tax year do not exceed relevant earnings in that year. An employer is not restricted by an individual’s earnings so they are able to pay in higher sums.

Sterland said: “Savers who have a large lump sum via a windfall like an inheritance might be looking to boost their pension by a maximum amount using up carry forward allowances before 5 April.

“But they need to be aware that that maximum will be limited by their relevant earnings in this tax year. Remembering that salary sacrifice pension contributions or other benefits taken by salary sacrifice will reduce relevant earnings, which could be an issue if someone wanted to make a big personal lump sum contribution using carry forward allowances.”

3. Make sure you are getting all the tax relief you should

The big draw to pensions are the tax savings – known as tax relief. Contributions are made from pre-tax income, so this effectively turns an £80 contribution into £100 for basic-rate taxpayers.

Higher and additional rate taxpayers can get further tax relief, making pension contributions even more attractive. They may need to claim it back via self-assessment. It means they could get a further £20 and £25 respectively on their tax returns, and this money can go into the pension too.

Ambery, at Standard Life, said: “However, some people don’t need to claim anything because their scheme gives full tax relief through payroll, for example, via salary sacrifice or a ‘net pay’ arrangement, where contributions are taken before income tax is applied.

“It’s a good idea to check with your employer or pension provider to understand exactly how tax relief works in your specific scheme.”

4. Did you get an end of year bonus? Sacrifice some into your pension

Bonus season typically happens – for those lucky enough to get one – between December and March. For those expecting a bonus, redirecting some or all of it into your pension can be a highly efficient way to strengthen your retirement savings.

Ambery said: “Bonus sacrifice can result in savings on income tax and National Insurance, making it a smart way to keep more of the value of your reward while giving your pension a meaningful boost. It’s a straightforward step that can help your money go further – just be sure to check that your total contributions remain within your annual allowance.”

Why you should consider acting now

Higher and additional rate pension tax relief had been, thankfully, the cat with nine lives when it came to chancellors seeking opportunities for raising extra revenue at recent Budgets.

“But the pressure on the UK’s public finances is not going away, so who knows what could happen to the higher rates of pension tax relief, or to the recently-expanded £60,000 annual allowance, in the next few years?” said Evelyn Partners’ Sterland.

“While the annual allowance for pension contributions is not quite "use-it-or-lose-it" in the same way – as previous years’ unused allowances might be available under "carry forward" rules – there’s no guarantee that either the higher annual allowance or carry forward will be around forever,” she added.

Hundreds of thousands of couples on low incomes could be unfairly missing out on extra financial support via Pension Credit due to the government’s controversial mixed-age couples rule.

The mixed-age couples rule was introduced in 2019 and prevents people of state pension age from claiming Pension Credit if their spouse is below age 66.

They would instead have to claim universal credit until their partner reachers state pension age.

Later life charity Independent Age warned that around 60,000 low-income couples are being barred from accessing higher benefits as a result of this.

The charity is urging the government to reverse the mixed-age couples rule to enable couples to claim pensioner benefits once the older partner reaches state pension age.

It claims that while couples in this situation can receive universal credit, it is not designed to meet the needs of people above state pension age.

Joanna Elson, chief executive of Independent Age, said: “The mixed-age couples rule is unfair and must end. It is wrong that older people on a low-income with younger partners are locked out of vital financial support, forcing them to wait years for entitlements like Pension Credit. Independent Age supports couples where the younger partner is in low-paid employment or unable to work due to health conditions, or due to caring for their older partner. This rule risks pushing more older people into deep financial hardship.

“Who you fall in love with and choose to spend your later years with should not determine how much financial support you receive. Far too many older couples are forced to live on tiny incomes because of this rule. It’s time for the government to reverse it.”

To mark Valentine’s Day and highlight its campaign to change the mixed-age rule, Independent Age will be sending Valentine’s Day cards to all 650 MPs, urging them to reverse the policy.

What is the mixed-age couples rule?

The mixed-age couples rule was introduced by the Tory government on 15 May 2019 to simplify Pension Credit.

The argument was that Pension Credit is intended to provide long-term support for pensioner households who are no longer economically active because of their age.

Previously, mixed-age couples, where one is of state pension age and the other is below the threshold, could choose to claim a working age benefit or pension age benefits if they were on a low income

But under provisions enacted in the Welfare Reform Act 2012, couples can now only access pension age income-related benefits when both partners have reached the qualifying age.

The changes affect anyone accessing the benefit since 15 May 2019.

Is the mixed-age couples rule unfair?

Critics say the mixed-age couples rule is unfair as it means someone on a low income has to apply for universal credit which is lower than pension credit.

Independent Age highlights government figures showing that, on average, affected couples could be losing around £5,900 a year, with some losing as much as £7,000.

Data from 2019 also shows 12% of couples who could be eligible for Pension Credit have an age gap of more than 10 years, meaning the older partner may have to wait until their late 70s to access pensioner entitlements.

This policy is creating issues for pensioners on lower incomes.

Independent Age said it received a call from a 79-year-old who was unable to claim pension credit because their partner is 59. Under the mixed-age couples rule, they will have to wait until they are 87 before they can access the financial support.

Elson added: “The government has created a flawed system where two people of the same age can be treated completely differently just because one has a younger partner.”

In another case, Andy Cressey from Goole, Yorkshire, said: "My partner June who is three years younger than me will be affected when I get to the retirement age of 67 in 2028, a little over two years time. From the information I have been able to find June will have to claim universal credit and my state pension will be taken into account with a pound for pound reduction in the amount she can claim. This effectively means we will both have to live off my state pension.

“I have also found out that if we live apart the council will pay my full rent and council tax as I will be a pensioner and my partner would have a full claim in with universal credit. So we will be better off if we do not live together, which is silly. We would not be able to afford to live together if that is the case. Why should I have to pay rent and council tax when I live with my younger partner, and she will have very little, if any, income herself? The system is bonkers to say the least."

Do you plan to use gold to help to fund your golden years? If not, you may want to reconsider.

With the gold price gaining 65% in 2025 and 7.6% in 2026 through to 2 February (despite a recent pullback) it is clear that gold has a role to play in investors’ portfolios. And one expert thinks that also applies to pensions.

“Gold’s unique characteristics, including its scarcity, liquidity and long-standing role as a store of value, all make a strong case for its inclusion in pension portfolios as markets become more volatile and traditional protections weaken,” said Maike Currie, vice president of personal finance at PensionBee.

So if you like to manage your pension actively, perhaps through a self-invested personal pension (Sipp), what are the main benefits that gold could add to your pension pot? And how much of your pension should you allocate to gold?

Gold could protect your pension through diversification

The key advantage to holding gold in your pension is that it offers a degree of protection through diversification.

It is crucial that your pension is as resilient as possible. You don’t want your golden years to be ruined by a stock market crash wiping out the value of your pot.

As such, most pension funds are diversified between stocks and traditionally safer investments like bonds.

However, that logic is starting to unwind. In recent years, bonds and equities have been more positively correlated with each other, thanks largely to persistent inflation (which erodes the real value of bonds over time).

“Investors are increasingly questioning the reliability and diversification benefits of traditional safe havens such as government bonds,” said Currie.

Gold is, in many people’s view, a better diversifier. Its low correlation with both bonds and equities means it can help to cushion pension savings during periods of market stress.

How much gold should you put in your pension?

The caveat is that, as gold price movements in late January and early February showed, it can be volatile. It also pays no interest, so is something of a dead weight in your portfolio outside of periods when its price is rising. Historically, gold prices have often traded flat for long periods of time (such as from the 1980s to the early 2000s).

For these reasons, you shouldn’t put too much gold in your pension.

“Understanding how much gold fits into your pension has never been more important, particularly for time-poor savers nearing retirement and looking to access their pension,” said Currie.

Currie recommends that gold should comprise around 5% of a well-diversified pension portfolio.

How you hold this gold is also important. While you could invest in gold mining stocks, these are often more volatile than the metal itself. You’ll get a more direct correlation with the gold price by buying a gold exchange-traded commodity ETC, such as the iShares Physical Gold ETC (LON:SGLN).

As of 2006, you can hold physical gold in a Sipp – but only in the form of gold bars, not gold coins.

We explain how to invest in gold in a separate article.

The pension strategy of successive generations of savers means they have built retirement plans that come to fruition when they stop work – often the time when they can start claiming their state pension, currently at age 66. But many pension experts now argue that this isn’t quite the right approach; instead, they advise, 75 should be the pivotal age in your retirement planning. That’s not to suggest everyone is going to have to work until 75, although many savers undoubtedly do intend to work well past state pension age. Rather, it’s the way the pension system works today – and the way we now live – that makes your 75th birthday such a significant moment.

It’s the popularity of income drawdown that has really changed advisers’ approach. In modern times, the majority of people opt to draw an income directly from their pension funds once they decide to start cashing in their savings. The fund can be left invested to grow further – and, very often, savers continue paying into it. They may have reduced their working hours, for example, but still be earning an income.

However, under HM Revenue & Customs’ rules, you’re only allowed to keep making pension contributions that qualify for tax relief until you reach 75. Most pension schemes therefore, won’t accept new payments after this point.

A related issue is that many pension schemes have restrictions on withdrawals of tax-free cash from pension pots. HMRC’s rules allow you to take up to 25% of your pension fund as a tax-free payment, either upfront or in instalments. But because of historic complexities, such as the lifetime allowance on pension savings, many schemes make this very difficult after 75.

75 – the pivotal age when it comes to pension strategy

Another factor to consider is the rules on passing on pension savings. If you die before reaching 75, money left in your pension fund can usually be passed on tax-free to your heirs; after age 75, they’ll pay income tax on any money they withdraw from your savings. And when pension savings become potentially subject to inheritance tax, from April 2027, the bill could be even more significant.

For these reasons, it increasingly makes sense to plan towards age 75, even if you intend to start withdrawing pension cash well before then. There are no certainties because everyone’s circumstances are different, but for many people it will work well to use pension and income-drawdown plans to maximise the size of their pension pots by the time they hit 75; thereafter, the focus should shift to “decumulation” – running the cash down as you live out the rest of your life.

Another point is that most people become more risk-averse as they get older – and many start to feel less confident in their ability to manage their finances. An income-drawdown arrangement might then no longer feel like the best way to draw cash from your savings; you may become anxious about the process of managing pension savings to continue generating income and to last for as long as you need the money.

Using your remaining savings to buy an annuity – offering a guaranteed lifetime income – could be a good move. And while you don’t have to make that decision specifically at 75, many advisers say moves from drawdown to annuitisation are particularly common around this age. You’ll also get a more generous annuity rate than you would have done ten years previously, say. You may even qualify for enhanced rates if your health has deteriorated.

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Should we stop telling women they lack confidence and need empowerment to invest? Some psychologists now say the lack of knowledge and confidence is a “misdiagnosis” and it is instead efficacy causing the gender pension and investing gap.

We’ve been hearing it for years – women don't invest or save enough into a pension because they are not confident and that women should all get into a room and empower each other. But is this just patronising fluff excusing the pay gap? Are there other issues behind the widening gap?

One psychologist, together with the University of Edinburgh, is suggesting another reason, putting the existence of the gender pension gap down to systemic, situational and social barriers.

Emily Shipp, a psychologist and associate of the Edinburgh Futures Institute, who also authored the report It’s Not About Confidence: The Hidden Forces Shaping Women’s Financial Futures, said: “For too long, the ‘confidence gap’ narrative we see in financial advice and media reports has masked the real systemic, situational and social factors that result in the pensions gulf.”

Take women’s mental load, for example. We carry a lot of it. I know I do. There is always something to plan or take care of and it often comes at the expense of looking after your own financial affairs.

“Women feel an overwhelming sense of mental load and pressure pretty constantly. It’s the work, the to do lists and all the stuff you hold in your mind,” Shipp said.

So, of course we do not have time to fit finance into an already cluttered brain. Perhaps it has nothing to do with confidence, but more about the lack of headspace making it difficult to take the steps to start investing and pension planning.

“Mental load and time scarcity operate together. Women are more likely to carry the ongoing cognitive labour of anticipating and coordinating care, while also spending significantly more time on unpaid work. These pressures reduce both the mental bandwidth and the available time needed for sustained engagement with long-term financial planning,” Shipp said.

The financial barriers for women

The report, supported by financial services firm Evelyn Partners, found 60% of women do not have a financial plan for retirement.

Systemic problems stem from defined contribution pensions, which compound the care-related pensions gap – and it is women who are often carers. The system does not work.

Social problems arise because there is a huge focus on pushing the ‘confidence gap’ yet addressing non-linear working patterns and normalising needs to be built into systems.

When it comes to situational solutions, the report suggests there needs to be more female financial advisers as well as the acknowledgement that the product journey matters – and these may be different for women.

I write this as I sit in Evelyn Partners’ offices, a firm established in 1836 – a time when women had no room at the table when it came to finances.

Evelyn Partners, like many financial services firms, was set up by men and skewed toward helping men.

Now, 200 years later, many firms are still making their way out of the male-dominated world they built their businesses around.

While firms like Evelyn Partners are making changes and doing more to understand how best to serve women, the industry as a whole has some way to go.

“Historically, financial advice and pensions policy have centred on typically male, linear career trajectories and financial goals, rather than the multi-phase, care-interrupted lives many women navigate,” Shipp added.

What can women do about the gender pension gap?

Women can improve their financial situation by shifting knowledge to informed actions and creating achievable steps, the report suggests.

Shipp said women need to engage with their future self, but in order to look forward they also need to look backwards.

“Look back on your past and see what you did well and how it helped you, and then think about your future self and what you can do,” she said.

“This isn't about predicting, but it’s about understanding what might be important to us in future and what we might need to consider and bring that into financial planning. Imagining your future is one of the biggest psychological barriers for many.”

Shipp added that looking at your future self was particularly important in a world of defined contribution pensions where savers have to make decisions around funds they invest in and be engaged with their pension.

“It amazes me how many people have not looked at their pension – log into your online account and see if that default fund is right.”

As it stands, men are expected to stop working with 75% more in pension savings by age 60 compared to women. But as long as we stop telling women they lack confidence and knowledge and change the narrative that tackles the systemic, situational and social barriers, the gender pensions and investing gap may finally be able to close.

See our article looking at the stories of two women who took steps towards getting to grips with their pension and the outcomes.

Don't miss the latest episode of MoneyWeek Talks, available on YouTube and your favourite podcast platform, where Yana Shkrebenkova, the CEO of Revolut Wealth and Trading UK, discusses why women should invest and how.

“I didn't have any interest in pensions at all,” says Ann Parker, 65, from her home in Solihull, West Midlands. “I heard the word and my ears shut. It's too complicated. I don't understand it. But my husband and I realised we had quite a few pensions all over the place so thought we better do something.”

Parker knows about managing money. She built a career as a senior buyer for blue chip companies, including Barclays. She knows about planning ahead too – running her own business as a longevity coach, “enabling people to live better longer”. None of that stopped her feeling adrift from her long term savings. And she is far from alone.

Just 30% of women feel empowered to make decisions about their retirement and 41% of men, research from pension provider Scottish Widows found. Consequently only 40% of women say they actively make decisions about money for retirement, compared to just over half of men.

Gender pension gap

This gulf in approach could be one reason women, on average, have much smaller pension pots, though the main cause remains the financial hit of time out of the workplace to raise a family and other caring responsibilities. Most recent UK government data, from 2020 to 2022, estimates average pension wealth at age 55 to 59 stood at £81,000 for women but £156,000 for men. A gender pension gap of 48%. Women’s pensions are worth roughly half men’s.

Susan Hope, retirement expert at Scottish Widows says: “With 60% of women not knowing who will manage their savings in retirement, we need to give women the tools to understand their bigger picture and to understand what levers they can potentially pull to close their own personal gender pension gap.”

Is pension consolidation worth it?

In Solihull, Parker would rather walk Trixie and Benny, her Labrador and Border Collie, than do pension admin. Like millions of others, the catalyst to act at all was pension freedoms, introduced in 2015 to let savers spend their retirement pots as they choose, driving a novel wave of excitement about retirement income.

“After that I consolidated all my pensions. It has proved very lucrative. In nine years it has tripled in value,” she says. Her pension pot is around £1 million now. That's after Parker took out the 25% tax-free lump sum to spend on her home and a luxury holiday to the Maldives.

The cost of retiring comfortably in a similar style is on the rise – at £43,900 a year for a single person and £60,600 a year for a two-person household, according to the latest Pensions UK analysis. (These figures are after paying tax, so you technically need more). For this level of retirement income, someone living alone would need a nest egg of £540,000 to £800,000, if using it to buy an annuity for a guaranteed income. For two people sharing bills it would be £300,000 to £460,000.

Higher income tax pensioners

To get her more than comfortable £1 million pot, Parker controversially disregarded the common rule not to give up her final salary (defined benefit) pension with its guaranteed income for life. “I had to pay for financial advice about that. A couple of thousand pounds and a bit of a joke, because the advice is always, “don't transfer” – that there's no risk leaving it where it is, whereas if you move it, there is risk, and the adviser doesn’t want any comeback,” she says.

“We ignored his written advice, and did consolidate and it turned out fine.” Parker now has a financial adviser managing her money whose advice she does listen to and benefits from. She doesn't know how she is invested.

Now it’s “a bit of a battle” to stay under the higher tax bracket, she says. As of mid-2025, more than one million pensioners were paying the higher rate tax (40%) or additional (45%) income tax rate, a figure that has doubled in four years due to frozen tax thresholds and rising state pensions.

“It stings to have to give 40% or more to the chancellor if we take out a larger amount in excess of day to day living expenses,” Parker says. Luxuries Parker can enjoy, she admits, only because she spent her professional life mainly at large global companies with generous pension schemes. “We’re spenders rather than savers,” she says, “left to our own devices we’d probably be flat broke”.

‘Money is a massive form of anxiety’

Counting the pennies is a current reality for Niamh Fagan, 27, a Swansea university materials engineering PhD student, at the other end of the spectrum by age and finances. After studying for eight years she is almost done. Between her doctoral stipend and time working in industry in her field, she manages on around £22,000 a year – less than minimum wage which is £24,784 from this April.

“Money is a massive form of anxiety. There's a lot of pre-planning, budgeting. PhD funding runs out before your final submission date. It's very normal for you to be working on it longer than you're paid for it. From the start of my course, knowing how difficult the job market is at the moment, I was like, oh, I need to maximise savings to get this done and to survive until I get employment,” she says.

Savings by age

Fagan’s boyfriend has recently moved in to help share the bills with her. Factory cleaning, pizza delivery and admin in a GP surgery have all helped make ends meet. With a frugal lifestyle, and a year working full-time for a large industrial employer as part of her course – “a massive help” – she has managed to save £10,000 in a cash account.

That's not bad. In terms of average savings by age 25 to 34 year olds in the UK have just £3,544. More than 12% have nothing and just over a fifth (22%) have less than £100. The median amount a Brit has in their savings is only around £9,633 – not much more than is necessary for an emergency fund that covers essential spending for several months.

Which is exactly how Fagan is using her buffer until her first wage at the end of January. Social media is awash with ‘finfluencers’ trying to entice young people into everything from fairly vanilla index funds to the Wild West of cryptocurrency; she has, she says, no interest in listening to them.

“I think the commercialisation of financial advice is concerning, especially with how, in order for them to make a living, usually they need sponsorships, so then they're plugging products that may not be in people's best interest,” she says.

Rise of the Gen Z investor

Fagan may be an outlier. Across 13 economies, the World Economic Forum’s latest Global Retail Investor Outlook found 30% of Gen Z start investing in early adulthood – compared to 9% of Gen X and 6% of baby boomers. By the time they enter the workforce, 86% of Gen Z have learned about personal investing versus 47% of boomers.

In Swansea, Fagan’s hope of “one day being able to put a deposit down on a little house, maybe in 10 years”, could be bolstered by taking a bit of risk. Investing in the stock market for the long-term beats cash over more than 100 years of data. But she is so far unconvinced.

“I tried investing once and it just felt like more complicated gambling,” she says. “I used one of those trading apps and didn't invest very much at all, in Google and Greggs because they're companies I know, and Greggs had just opened a drive through nearby.”

Will my pension still exist?

Forty-two percent of under-30s like Fagan are currently at risk of poverty in retirement, according to Scottish Widows. The only other age group with an outlook this poor is 60 to 64-year-olds – however levels of home ownership among this group are higher than is expected for Gen Z at the same age, making many Boomers at least asset rich.

Fagan has, like a steady 10% of those eligible, so far opted out of pensions she's been auto enrolled into as part of any short-term or part-time contracts because, she says, she needed the money today.

She intends to join her company pension scheme now she is starting full-time sustained employment. But like many of her generation she is pessimistic about the good it will do her – 46% of Gen Zs do not believe even the state pension will exist by the time they retire, according to the Pensions Policy Institute.

“I'm not necessarily worried about my pension, because I'm unsure that I'll ever get to retire with the way the pension age limits are going up,” she says. “If I do get to retire, God knows how you'd access money saved by companies that won't probably exist anymore.”

Convincing wary savers like Fagan to trust financial services for the long haul with their hard won money will be no small battle for both industry and policymakers’ ongoing efforts to boost Britain's pension coffers.

Tens of thousands of self-invested personal pension (Sipp) plans with property holdings could land their beneficiaries with an inheritance tax (IHT) nightmare after new rules come into effect next year.

Loved ones may not have enough time to sell commercial property assets held in the more than 50,000 plans within a crucial six-month HMRC deadline, warns financial firm Bowmore Financial Planning.

Unused pension funds, including those from Sipps, will be subject to IHT from April 2027, as announced by the chancellor Rachel Reeves in the 2024 Autumn Budget.

However, plans with commercial property holdings could leave their beneficiaries scampering to find cash to pay IHT bills upon the owner’s death.

Figures obtained from the Financial Conduct Authority (FCA) via a Freedom of Information request by Bowmore reveal there are currently 54,387 Sipp plans that hold commercial property.

Commercial property includes offices and industrial and retail units. Sipp owners can invest in a commercial property fund, which pools money from multiple investors to buy and sell properties through an investment manager.

The money in a Sipp can also be used to directly buy commercial property, with any rental income earned from it exempt from income tax.

Why commercial property in Sipps poses an IHT risk

Commercial property is a relatively illiquid asset, meaning it can be hard to sell quickly, unless you drastically lower the price.

IHT is normally due within six months of someone’s death. But Bowmore warned that, from April 2027, beneficiaries may struggle to sell commercial property in order to raise liquidity to foot the IHT bill fast enough to meet this deadline.

Payment plans can be agreed with HMRC if the six-month deadline is missed, but interest will accrue on any unpaid tax.

John Clamp, financial planner at Bowmore, said: “Introducing IHT on pensions fundamentally changes the risk profile of holding commercial property inside a Sipp.

“These assets were never designed to be accessed quickly, and with the changes to IHT rules families could suddenly find themselves trying to raise a six-figure tax bill without the liquidity to do so."

A Treasury spokesperson said: “We continue to incentivise pension savings for their intended purpose of funding retirement instead of being openly used as a vehicle to transfer wealth – more than 90% of estates each year will continue to pay no inheritance tax after these and other changes.”

What should Sipp owners invested in commercial property do?

Clamp said one option is a ‘Whole of Life’ (WOL) insurance policy.

These policies pay out a guaranteed lump sum upon someone’s death, which can be used by beneficiaries to pay an IHT bill and prevent them from having to sell assets, like commercial property, instead.

You will have to pay the insurer for one of these policies, but it could prove more cost-effective than having to rush through the sale of commercial property.

Another is by reducing the value of your estate by spending more of your money so any eventual IHT bill is lower and the sale of any commercial property by your beneficiaries is not needed.

The rules can be incredibly complex, Clamp added, so it’s worth seeking advice from a financial adviser.

Pension savers are being encouraged to switch beneficiaries on their pension paperwork now to protect their retirement pot from inheritance tax for the next 16 months.

When someone starts saving into a pension they have to fill out certain forms. This includes a section on ‘beneficiary nomination’ – essentially telling the pension provider who should inherit their retirement pot when they die.

Many people fill in and forget this part of the paperwork and typically their current spouse is named as beneficiary. But looming policy changes to inheritance tax and pensions mean there is now a roughly 16-month window where pension beneficiary nominations really matter.

One financial advice firm told MoneyWeek it is currently flagging to clients they may want to temporarily change their pension beneficiaries in case they die before April 2027 when the stricter new rules come in and pensions become subject to inheritance tax.

Oliver Saiman, co-founder of wealth manager Six Degrees, said: “Some families may want to temporarily nominate their children – or any other longer-term intended heirs – as pension beneficiaries now, with a view to switching nominations back to a spouse once the new regime starts in April 2027.”

Avoiding inheritance tax on pensions

The guidance comes as new rules mean from 6 April 2027 unused pension funds are due to be brought into an individual’s estate and potentially subject to inheritance tax at 40%. Until then, pensions still sit outside the inheritance tax net.

By changing the nominated beneficiary to your children – or other heirs beyond your spouse – if death occurs before April 2027, the pension can pass outside the estate free of inheritance tax to the next generation.

After April 2027, you can change the nomination form back, often to benefit a spouse, allowing the survivor to access the pension flexibly under the new rules. Spouses inherit free of inheritance tax in any case.

“No assets move and no irrevocable decisions are made – it’s an administrative change that can be reversed at any time – but the timing could materially affect outcomes for some families,” said Six Degrees’ Saiman.

“While investors and families are going through their ’spring clean’ of their personal finances we find that pension beneficiaries is an area that can be overlooked,” he added.

How to save on inheritance tax

Saiman gave the example of a married individual who has a pension of £1 million.

“Normally, if the pension holder dies, it passes to the spouse free of inheritance tax due to the married couples exemption. However, it then forms part of the spouse’s estate on their death, meaning IHT is ultimately paid when the surviving spouse dies (assuming that takes place after April 2027),” he pointed out.

But by temporarily nominating a child – or if there are no children, any one else you would like to inherit – before April 2027, the pension can pass directly out of the estate if the holder dies before that date.

Saiman said: “This avoids IHT on the pension entirely. Before 6 April 2027 when the new rules come into effect, you could revert the nomination back to the spouse, so they retain flexible access to the pension.”

Without the temporary change: £1 million passes to the spouse and is included in their estate, meaning an IHT bill of potentially £400,000 later.

But with the temporary alternative person nomination, £1 million passes outside the estate on death, so there is no inheritance tax on the pension.

“This is purely an administrative change, but the timing can make a substantial difference in some families,” said Saiman, adding “clearly this is applicable only if the remaining spouse is not reliant on the deceased’s pension”.

Family circumstances can change, for example due to death, divorce or remarriage, so it is always a good idea to check your nominated beneficiary is up to date.

How to change your nominated pension beneficiary

Changing pension beneficiaries is usually straightforward – most providers allow you to update nominations online or via a simple form.

The change doesn’t move any money. It just updates who receives the pension when you die. You can switch it back at any time.

To change your pension beneficiary, log in to your online pension account and find the ‘beneficiaries’ or ‘nominations’ section to update details.

Or call your provider to request a new ‘expression of wishes’ form, which you'll complete, sign, and return, noting that any new form replaces older ones.

Pension savers could be set for new protections that will ensure they get better value for money from their workplace schemes.

Official figures show more than 16 million workers have defined contribution (DC) pensions through their job but performance can vary.

The performance of your workplace pension can impact how much you can access for your retirement.

That is pretty important with inflation remaining high and the typical cost of a comfortable retirement hitting £43,900 last year.

The Financial Conduct Authority (FCA), the Department for Work and Pensions (DWP) and The Pensions Regulator (TPR) have published joint proposals aimed at encouraging workplace pension schemes to improve their performance.

Under the proposed changes, pension schemes will need to publish clear data on their performance, costs and quality of service based on a ratings system giving each a Value for Money score.

If a pension is deemed to offer poor value, firms and trustees must then fix it by moving staff to better schemes or by making improvements.

Sarah Pritchard, FCA deputy chief executive, said: “Good value isn’t just about low costs – it’s about strong performance, good service, and transparency.

“We want to see a focus on value. By working with government and The Pensions Regulator, we will help secure better returns for pension savers.”

Here is how the changes could boost your pension.

Value for money checks

The FCA’s consultation paper highlights that value for money makes a real difference for pension savers.

Over five years, a £10,000 pot could grow to £10,400 in a poor scheme or £15,100 in a high-performing one – 46% more, according to the City watchdog.

The FCA wants to address this by getting governance committees and trustees to conduct value for money assessments of their schemes.

Each will be given a colour rating, with dark green for strong performance, light green for good value, amber for improvement, and red for poor value.

Assessments will be made based on costs, investment performance and service quality.

The idea is that people running the schemes can compare them more easily and switch or try to alter performance if necessary.

Savers will also ultimately know if they are getting a good return or not and could put pressure on their employer to make changes.

Vahey, head of public policy at AJ Bell, said: “Most workers don’t get to pick which pension scheme their employer uses, but having clear information about how the scheme is doing means you can have better conversations with your employer to make sure it’s a good choice.

“This information is also handy if you leave your job, as it can help you decide whether to keep your pension where it is or move it to a scheme that’s performing better.”

Pension performance

The ratings will consider past performance and a future projection will also need to be provided.

The FCA has suggested that firms and trustees should report the expected net investment returns over the next 10 years, include an average standard deviated return.

Vahey warned that this approach comes with significant challenges.

She said: “Although it’s easy to see why the government wants to encourage workplace pension investment in private markets, measuring performance that has not yet happened opens the possibility that some schemes will ‘game the system’ by including overly optimistic returns that in practice may never materialise.”

The regulator also proposed that a third party is used to obtain and consider advice on the assumptions.

Transparency

The FCA wants savers to be able to see how their pension is invested across different assets and the costs.

The amount you pay for your pension can have an impact on returns.

Under the proposed changes, the total costs and charges over one year, three years and five years where available will need to be provided.

Service quality

The FCA also wants to ensure that pension savers get good customer service.

This is important if you want information on accessing your pension for retirement or to change contributions.

The regulator said it will consult on how pension savers are supported to make plans and decisions for their retirement and how easy it is to amend and engage with their pension provider.

The consultation on the proposed changes ends on 8 March 2026 and will be subject to the Pension Schemes Bill receiving Royal Assent.

It coincides with other plans to help people find out about their pension plans more easily such as the introduction of Pension Dashboards.

Rob Mansfield, independent financial adviser for Rootes Wealth Management, said pension performance is hard to decipher.

He said: “For most people, what they're interested in is, is it growing and if so how much by? That should be easy by looking at the fund factsheet but the choice of benchmark can flatter, it needs to be comparable.

“This traffic light system is interesting but it'll be lost on most people. For example, If your ‘average annualised standard deviation of returns’ comes out as red, what action should you take? If you're in drawdown that could be a bad sign but if you're in the early stages of a career and looking for growth, it may be irrelevant.”

Cutting unused direct debits may be a popular new year’s resolution to boost your finances but it may also be good for your pension, research suggests.

The new year is a good time to review your spending. A survey by Hargreaves Lansdown found 24% list saving more as a top new year’s resolution, while 9% want to put more into their pension.

Cancelling unused regular payments such as gym memberships or streaming subscriptions is a popular way to achieve these aims, saving money and freeing-up cash.

By putting the extra cash from cancelling wasted direct debits towards your retirement savings, you could end up boosting your pension pot by up to £37,000, research by Standard Life suggests.

Mike Ambery, retirement savings director at Standard Life, said: “Unused direct debits have a habit of quietly draining our bank accounts in the background.

“The new year is often a time people focus on their physical health, but it’s also the perfect moment to think about your financial wellbeing too. Redirecting just a few of those forgotten payments into your pension could make a meaningful positive impact to your financial future.”

How you could boost your pension by scrapping unwanted direct debits

Standard Life analysis has found that someone who begins working at age 22 with a salary of £25,000 and pays the minimum monthly auto-enrolment contributions could build a total retirement fund of £210,000 by the age of 68.

However, that could be boosted by diverting money from wasted direct debits.

Redirecting £39 of unused monthly direct debits into a pension – roughly the equivalent of leading streaming services such as Netflix and Disney+ at £18.99 and £14.99 respectively today – could increase the projected fund to £247,000.

That is £37,000 more in today’s prices, according to the research.

The benefit could be even greater for those with more direct debits on the go. Someone who spends double the amount on wasted direct debits – £78, roughly the equivalent of an average UK gym subscription (£47.24), premium video streaming (£18.99) plus premium music streaming (£12.99), could see a boost of £73,000 in today’s prices, Standard Life said.

Ambery warns that it is important to double check terms and conditions before cancelling any direct debits or subscriptions to avoid potential penalties or impact on your credit score.

He added: “If your retirement is decades away, pensions might not feel urgent but small changes made early on can have an outsized impact thanks to tax relief and the potential power of compound investment growth. A financial reset in January can make a meaningful difference to the income you’ll have in later life.”

How to boost your pension contributions

The typical annual cost of a comfortable retirement is £43,900 and analysis by Quilter suggests retirees would need a pension worth £738,000 to generate this level of income.

Check the value of your pension to help work out how short you are of your own target so you can assess how much more you need to put away.

Ambery said: “Many people have only a vague idea of how much is sitting in their pension. Taking a few minutes to check your latest statement – or log in online – can be eye-opening. Once you know where you stand, it’s much easier to judge whether you’re on track or need to make changes. Pension calculators can also help turn today’s savings into a clearer picture of your future income.”

It is also worth tracking down old pension pots to see if it is worth combining to save on fees and maximise performance.

Ambery added: "Just like it’s easy to lose track of time between Christmas and new year, it can be easy to lose track of your pension plans.

"Make sure you know where to find your old plans. You can use the government’s Pension Tracing Service to help you hunt down any you might’ve lost track of.

“Once you’ve found them, keep your paperwork and pension admin organised and in a safe, easy-to-access place. Staying on top of this now will save you time and stress later.”

Experts suggest automating your contributions to make it as easy as possible.

Sarah Coles, head of personal finance at Hargreaves Lansdown, said: “If you want to build your pension, consider your monthly contributions.

“Just do what you can afford, and set it up to come out of your account before you have a chance to miss it – so you automatically do the right thing every month. You could be surprised at how your nest egg builds. If, for example, you were to invest £100 a month for ten years, and have average growth of 5%, you’d be sitting on £15,528.”

City regulators are proposing new rules on pension transfers amid growing concern that savers are losing out. The Financial Conduct Authority (FCA) wants to impose new requirements on pension providers to offer more detailed information when savers consider transferring from one defined-contribution pension scheme to another.

Until now, the FCA has been most concerned about protecting savers with defined-benefit schemes (where pension benefits in retirement are guaranteed), for whom a transfer to a defined-contribution scheme offering no guarantees almost never makes sense. However, the regulator now believes many savers arranging supposedly more straightforward defined-contribution schemes may also be losing out.

Consolidating multiple pension pots

The intervention reflects huge growth in the defined-contribution sector, especially since the introduction of the auto-enrolment workplace pensions system. Many savers now have several small pots of pension savings, built up as they have moved from one employer to another, as well as when saving outside of work. Consolidating these small pots by transferring all or most of them into a single pension arrangement can be a good option for savers, who get economies of scale in a larger fund as well as the ease of having to track fewer accounts.

However, the FCA’s research suggests most savers transferring pensions do not take independent financial advice, choosing a new provider for themselves rather than getting help to choose the best possible provider. “Few consumers who transfer consider factors such as fees and charges, investment choices, decumulation options or potential loss of guarantees or benefits,” the regulator warns. The cost of a misstep can be substantial, particularly given the wide range of charges made by different pension providers. The People’s Partnership found that a 30-year-old with average earnings who moves a £10,000 pot of savings away from a provider charging 0.4% a year to a rival levying 0.75% could end up with a final fund worth almost £33,000 less.

The not-for-profit financial-services business calculated that collectively, savers could eventually miss out on £1.7 billion owing to poorly informed transfers made over the year to June 2025 alone. Many savers also fail to identify benefits they are giving up and not replicating by moving provider, such as opportunities to retire at an earlier age or enhanced benefits for dependants. And some plans offer a much wider range of options when savers want to start drawing down income as they move into retirement. The FCA therefore plans to require providers to provide much more detailed information when a saver proposes to move a pensions pot to them, with data that enables more meaningful comparisons of the likely outcomes of the transfer, particularly in relation to charges. It believes the introduction of digital pension dashboards, through which savers will be able to see details of all their pension pots in a single online portal, will make it much easier for providers to offer useful information.

Experts are supportive of the proposals, but some had hoped the FCA would go further. In particular, the FCA has no plans to ban providers offering incentives to persuade savers to choose them, such as reduced upfront charges or even cashback benefits. Critics argue such incentives distort decision-making, blinding savers to the long-term impact of challenges such as higher charges.

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Parents who take time off work to raise their children could be missing out on hundreds of pounds a year in extra pension cash because they’re not taking advantage of a little known rule.

Many parents have periods when they are out of the workforce – and so are no longer earning – when they have a family. Often they think this means they must pause their pension contributions.

But in the UK, even if you have no earnings, you can still pay up to £2,880 into a personal pension each year to give you more money in retirement.

You also receive 20% government tax relief top-up, bringing the total annual contribution in your pension pot to £3,600 – an extra £720 of ‘free’ money to boost your pension.

If you are a non-earning parent and can’t afford to pay into your pension, there is a neat workaround; your working, earning spouse or partner can contribute to your pension on your behalf and you still get the £720 tax relief top up.

Ruth Handcock, CEO of Octopus Money, a financial advice firm, said: “I can’t shout about this policy enough. As a working parent who has experienced parental leave twice, I empathise with those families who want to celebrate the joy of having children without compromising on their financial security for later life.”

She added: “The earlier you know, the bigger the difference it can make. I strongly urge all new parents to think about financial planning in parallel with family planning – to futureproof the whole family, not just the newest member.”

‘I didn’t know this government pension rule existed’

Octopus Money research suggests millions of families are unaware of this little-known bonus that allows partners or relatives to pay into someone’s pension while they’re off work, with the government automatically adding a top-up to boost your pension even further.

Despite being established over 25 years ago under Tony Blair’s 2001 Finance Act, the majority of parents (63%) have never heard of this policy. Nearly two-thirds (65%) say they would have used the rule if they had known about it.

The findings come from a nationally representative survey of 1,000 parents, commissioned by Octopus Money.

Based on official Office for National Statistics (ONS) data, Octopus Money estimates UK families who missed the opportunity could have lost out on a total of £2.5 billion in pension top-ups while they took parental leave, if they were non-earning.

One mum who narrowly missed out is product manager Ekaterina, 33. She said she didn’t even know the rule existed until it was too late.

“I hadn’t really thought about how taking parental leave would affect my pension, not until quite late into my leave. Before maternity, my focus was on short-term things like setting up the nursery and budgeting for time off, not the long-term impact on my pension or future wealth,” she said.

Her employer gave her information on maternity benefits, as well as access to financial advice from Octopus Money, which helped her understand how even a short break can affect future contributions – though unfortunately she read the material too late to benefit from the pension rule this time around.

“I didn’t know this government pension rule existed and I think that’s the same for a lot of other parents. It’s a missed opportunity to keep long-term finances on track during a period when many of us are focused on day-to-day stability,” said Ekaterina.

She added: “My husband and I are quite open about money, and if we had known that this was an option, we would definitely have done it. It’s such a practical way to balance financial gaps that can otherwise quietly grow over time.”

Ekaterina and her husband have now moved from just focusing on short-term costs like childcare, to planning for long-term pensions, savings, and investments.

“Looking back, I wish I’d started investing earlier and paid closer attention to workplace pension policies,” she said.

Gender pension gap

The rule that allows a working partner to contribute to a non-earning spouse’s pension applies to men and women. But in reality it is women who are more likely to take time out of the workforce and need their pension boosted.

Career breaks – often due to caring responsibilities – are what help push one in three women into pension poverty, according to a Scottish Widows report this year, which found women face a gender pension gap of £113,000 compared to men.

The median total private pension savings for women at retirement is £173,000 versus £286,000 for men, according to Scottish Widows. This gives a gender pension gap of 32%.

A big reason for the difference is that women are 12 times more likely to take a break in their career to raise children (36% versus 3%), leading to loss of income and gaps in their pension contributions.

Greater uptake of the rule that allows the earning partner to pay into the non-earning partner’s pension could help plug the ‘pension gap’ between men and women.

Women are aware they are behind in pension saving and are worried. More than two fifths (42%) of women say they are not confident they will have enough in their pension to live comfortably in retirement, compared to just over a quarter of men (28%), according to research by Octopus Money.

Around a third (34%) of parents reduced or paused their contributions to their pension during their parental leave and one in six stopped their contributions altogether, the study found.

More than half (52%) of parents said becoming a parent hit their finances harder than expected. While many assume childcare costs are the main concern, parents say their biggest financial worry is saving for their children’s future (45%), followed by day-to-day living costs (42%).

Among 13,000 customers signed up with Octopus Money, the pension gap between men and women widens sharply with age.

Women in their early 20s start out slightly ahead, but by their mid-20s men have overtaken them. By age 55 to 60, men have around 40% more in their pension pots than women – illustrating that a pause in contributions when starting a family can snowball and have a real impact on your finances in later life.

Michelle Kennedy, chief executive of Peanut, an app connecting women through all stages of motherhood, said: “It is so important to understand what you can do, what you're entitled to, what everything means, how things work, your contributions. Should you be making the most of your contribution? You bet your life you should be.

“All of these things are so fundamental. If you are someone who likes to feel empowered in any other element of their life, please let it also be with your own personal finances.”

The investments in your pension can have a huge bearing on the size of the pot of money you’ll end up with in retirement.

Investment trusts, while traditionally have been overlooked, are increasing in popularity and are some of the top picks for DIY investors.

Investment trusts can help generate income, deliver strong dividends, as well as give you exposure to private companies.

According to the Association of Investment Companies (AIC), an industry body that represents investment trusts, retail investors now own 26% of investment company shares, compared to 25% two years ago.

“Investment trusts are built for the long haul,” said Nadir Mirza of Tyndall Investment Management. “Pension capital demands patience, governance, and discipline – three qualities that sit at the core of well-run investment trusts.”

Investment trusts that focus on dividend-paying companies have always been a popular pick – and not just among income investors wanting a regular stream of income.

That income reinvested can be a significant boost for growth too. For example, in the UK reinvested dividends have made up around 67% of total returns over 20 years.

So when it comes to your self-invested personal pension (Sipp), which investment trusts should you add? Here’s what the experts say.

Investment trusts for your pension

1. JPMorgan Global Growth and Income (LON: JGGI)

If you are still building your pension – known as the accumulation stage - a global equity trust makes the most sense, says Emma Wall, chief investment strategist at Hargreaves Lansdown.

“The JPMorgan Global Growth and Income trust is a good option, managed by Helge Skibeli who has more than 30 years’ experience, supported by two other managers in London and New York supported by analysts across various continents to help spot the best opportunities across the globe.”

The team looks for companies with attractive valuations, that offer significant potential for growth and are unlikely to suffer big share price volatility. The top 10 holdings will be familiar to investors. Microsoft, Amazon, Nvidia, The Walt Disney Co and Johnson & Johnson are among the largest positions.

Wall adds: “We like it because it has a core approach – neither growth or value biased – and a robust dividend policy paying out quarterly, which can be reinvested for accumulation or take an income for those already in retirement.”

The trust has returned 62% over five years.

2. The Brunner Investment Trust (LON: BUT)

Pete Walls of Unicorn Asset Management favours trusts with greater geographical diversification and “a bit less of the Magnificent 7.”

“In the prevailing, highly concentrated, world market, I have reservations about the fact that many of the global trusts have such a large exposure to the USA,” he said.

“The Brunner Investment Trust styles itself as an ‘all weather’ global equity portfolio. It’s been around for almost 100 years so there’s a good chance it will continue to prosper for long-term pension investors.”

Some of the trust’s top 10 holdings include Microsoft, payments giant Visa, energy stock Totalenergies, chip-maker Taiwan Semiconductor Manufacturing and hotel group InterContinental Hotels.

“Despite having a lower weighting to the rampant US market than some of its peers, portfolio performance has been good,” added Walls.

While the dividend yield is a modest 1.7% it's dividend has increased year on year for the last 53 years. The trust has returned 73% over five years.

3. The Law Debenture Corporation (LON: LWDB)

Investors who believe in a prosperous future for the UK might consider The Law Debenture Corporation, a trust suggested by Walls and Mirza.

The trust balances income stability with long-term growth potential, with around 83% in UK stocks.

Mirza said: “For a pension investor, it’s a compelling combination: dependable income, valuation discipline and genuine flexibility, underpinned by a structure designed to compound quietly over time.”

Its top 10 holdings include banking stocks HSBC and Barclays, car manufacturer Rolls Royce and mining firm Rio Tinto.

It has returned an impressive 100% over five years.

Walls added: “It’s been listed on the London Stock Exchange for more than 135 years, so once again it’s likely to be around for some time to come.”

4. Nippon Active Value Fund (LON: NAVF)

This trust targets Japanese small and mid-cap companies trading below intrinsic value.

“The Nippon Active Value fund is a timely expression of Japan’s long-overdue revival,” said Mirza. “After years of corporate inertia, Japan is finally embracing reform – balance sheets are leaner, governance is improving, and management teams are starting to prioritise shareholder returns. The fund’s activist approach fits this environment perfectly.”

Mirza added: “This hands-on strategy has delivered strong NAV growth in a market that remains deeply under-owned by global investors. For pension investors, this is the kind of exposure that adds genuine diversification and long-term alpha potential – an active, conviction-led play on one of the few major markets still trading at a structural discount to its own potential.”

Top 10 holdings include medical supplies firm Hogy Medical, media company Fuji Media Holdings and environment product manufacturer Ebara Jitsugyo.

The trust has returned 117% over five years.

5. Augmentum Fintech (LON: AUGM)

Should you wish to invest in a specific theme, you could plump for one such as Augmentum Fintech, suggests Dan Boardman-Weston, chief executive of BRI Wealth Management.

“This is a trust that may be suitable for those with a high appetite for risk and a long-term time horizon. It focuses on potential high-growth private companies in the fintech space.”

Augmentum has benefited from being a former shareholder in Interactive Investor. Its top 10 holdings include Tide, which operates banking services for small businesses and online challenger bank Zopa.

Augmentum trades at nearly a 50% discount to the value of its assets. The fund has lost 34% over five years.

“Those with a good appetite for risk and appropriate time horizon should consider a small position as part of a diversified portfolio,” Boardman-Weston added.

How to choose an investment trust for your pension

If you’re considering an investment trust for your pension then there are several things to help with your decision on whether to invest.

“First decide how much risk you want to take, and where in the world you want to invest,” said Laith Khalaf, head of investment analysis at AJ Bell. “Then it’s a question of comparing investment strategies and manager track records, as well as considering costs.”

What a trust invests in is crucial. The top 10 holdings and percentage of the trust’s value held in each company is typically easy to find on a factsheet, which is a document provided by the investment company and refreshed regularly.

You can view them online directly from the fund management company or on an investment platform such as AJ Bell or Hargreaves Lansdown.

Understanding a trust’s strategy is important. “You’ll want to understand how the fund manager aims to deliver a strong return over time without taking too much risk in any one area,” said Nick Britton, research director of the AIC.

“It can be useful to look at the trust’s record – though it does not guarantee future returns – and how it has performed in various market conditions. Investment trusts can borrow to invest, which can boost long-term growth but also adds risk, so check the trust’s current level of borrowing - known as gearing - and borrowing policies so you know how much extra market exposure you may be taking on.”

“As you get closer to retirement, capital preservation may become more important to you. At this time, many people think about reducing their weighting to equities, and there are some trusts that aim to preserve wealth by spreading your investment over assets like equities, bonds, alternatives and cash.”

Since investment trusts typically trade at either a premium or discount to their net asset value (NAV), based on the balance of supply and demand, you should take a look at the discount or premium on the trust.

Khalaf added: “This shouldn’t be a major decision driver for long term investors, unless it’s deviated substantially from the norm.”

When it comes to financial planning, decisions around what to do with our retirement pots – from building them to spending them – are among the most important we’ll ever make. But getting professional help in this area has just become trickier.

The popular Retirement Adviser Directory, operated by the government’s MoneyHelper, closed this month, leaving those with pension questions fewer options to find advice.

The list was often a go-to because it was free, impartial and non-commercial, with the site pledging: “We don’t receive any incentive or commission and won’t share your details or contact you.”

Retirement advice can include everything from how to invest, to the best way to drawdown a pension, paying for care home fees, equity release and inheritance tax. It is a very complex area and one where it is highly recommended to speak to a regulated financial adviser.

MoneyHelper said the Retirement Adviser Directory was closed due to the landscape having “evolved significantly” since it launched 10 years ago, and there are now a wide range of free retirement adviser directories in place.

Zoe Burns-Shore, executive director for customer delivery at the Money and Pensions Service, said: "We don't take the decision to decommission our guidance tools lightly, but we must ensure we are able to focus on supporting our customers where there isn't guidance readily available.

"Many advisers which were listed on the RAD are on other established directories. MoneyHelper now signposts people to these free online directories, with clear guidance to support them."

The closure comes as more people than ever are accessing their pensions. Recent data from the Financial Conduct Authority shows nearly a million pension pots (961,575) were accessed for the first time in 2024/25, up around 43% on 2019/20, so more people than ever are hitting retirement decisions at once and looking for help.

According to the same data, nearly 70% of people made complex pension decisions without professional advice. And most people in drawdown are taking regular withdrawals of more than 8% a year, which risks depleting their savings too quickly.

The closure of the Retirement Adviser Directory means those searching for reliable pension advisers to help them have to do a bit more digging. But several options remain.

Where to go for pension advice

Pension Wise

Pension Wise is a government-backed specialist service for those aged 50 or over with a defined contribution pension pot. Pension Wise provides a free 45 to 60 minute appointment (online, by phone on 0800 138 3944, or face-to-face at a local Citizens Advice) to explain your retirement options – in the form of impartial guidance, but not fully fledged bespoke advice.

However you may have to be very patient to actually get to speak to anyone at Pension Wise. Savers are still waiting an average of more than three weeks for an appointment, three times longer than before the pandemic, new data obtained by wealth firm Quilter under the Freedom of Information Act, showed.

The same FOI revealed Pension Wise’s telephone service remains the dominant channel but digital guidance, introduced in October 2024, has surged from approximately 2,000 appointments a month initially to consistently more 3,000 since the beginning of the summer 2025.

Jon Greer, head of retirement policy at Quilter, said: “Guidance is only valuable if it is accessible. We know that engagement is fragile, and if people encounter delays when they first reach out for help, many will simply give up and press ahead without any help.”

With targeted support on the horizon – designed to help people with simpler needs get appropriate direction without the cost of full financial advice – there is a chance that financial providers can take some of the burden away from MoneyHelper.

Unbiased

Unbiased is an online directory to find regulated financial advisers. It is free for people seeking a financial adviser to use, but the firms recommended to you have paid to be listed there. You can filter by the type of advice you need – including pension advice – and your location so you can find an adviser local to you.

Unbiased describes itself as “an AI-enabled financial advice platform” that applies advanced artificial intelligence models “trained on a rich dataset of user activity to intelligently match individuals with qualified advisers”.

The website claims to have more than 27,000 vetted advisers listed, and that it can match you with the most appropriate one in as quick as 36 minutes.

It’s important to remember Unbiased is a commercial enterprise. On its Linkedin profile it states since 2010 it has generated over $100 billion in assets under management opportunities for financial advisers, with 65% of “prospects” – by which it means people searching for professional help – being new to advice.

Yet it scores a high 4.4 out of 5 on review site Trustpilot, with reviewers overwhelmingly saying they had a great experience with the Unbiased. Consumers reported feeling the company connects them with knowledgeable professionals who understand their needs.

VouchedFor

VouchedFor is also a commercial adviser directory of regulated financial professionals that works very much the same as Unbiased (though it claims to “do more checks than any other adviser directory”).

It’s free for you to use and the advisers pay to be listed. You answer a few simple questions, including the type of advice you’re looking for and how much you have in savings, and VouchedFor aims to match you with your “ideal” adviser. Then you can have a free, no-obligation chat with them.

VouchedFor scores slightly higher than Unbiased on Trustpilot with a score of 4.7 out of 5. Reviewers liked the quick and efficient response times, and felt confident in the advice they received and valued the clarity with which information asked for was presented to them.

Society of Later Life Advisers

The Society of Later Life Advisers (SOLLA) specialises in regulated and accredited advisers who understand financial needs in later life.

Established in 2008, it is a not for profit organisation “dedicated to higher standards and accessibility to regulated financial advice for older people and their families”. There are no shareholders and any profit is used to sustain the Society and its objectives.

SOLLA has an adviser directory which you can use to search by location and advice type, including paying for care and equity release. All full members of the Society must achieve the Later Life Adviser Accreditation and adhere to a Code of Practice to ensure their clients know what to expect from their services.

SOLLA accredited advisers can advise on:

• Retirement planning (pensions and annuities)
• Funding for care home fees
• Funding for care in your own home
• Equity release and other property options
• Savings and investment planning
• Tax matters and estate and wealth planning

Personal Finance Society

The Personal Finance Society is the professional body for the financial planning profession in the UK. Its remit is to “lead the financial planning community towards higher levels of professionalism exhibited through technical knowledge, client service and ethical practice”.

The Personal Finance Society has an adviser directory of its members that you can search by location, areas of expertise and contact method.

Interest rate changes can have a big impact on retirees’ income, for better or worse. For people who have a few different types of pension the effects can be magnified. With UK interest rates falling, we look at how a cut in the Bank of England base rate alters the landscape for those at and near retirement.

Pensions are sensitive to changes in interest rates. The Bank of England has cut interest rates from 4% to 3.75% following a cooling in the rate of inflation, as measured by the Consumer Prices Index, as well as slower wages growth.

Interest rates in the UK started falling in the summer of 2024, with the Bank of England cutting rates in August 2024 and again in August 2025, bringing the rate down to 4% by late summer 2025 as inflation eased.

Further cuts are anticipated into 2026 as the economy cools and inflation stays low. Lenders have been reducing mortgage rates in response – but for millions of people in or approaching retirement the big question is, what do falling interest rates mean for my pension and retirement income?

Adam Cole, retirement specialist at Quilter, said: “An interest rate cut can have very different effects across the pensions landscape, and the impact will depend largely on the type of pension someone holds and what they are planning to do with it.”

Impact of interest rate cut on defined benefit pensions

For members of defined benefit pension schemes, lower interest rates tend to push up pension transfer values – the amount of lump sum you could get instead of receiving a guaranteed, regular income.

This is because the future income promised by the pension scheme becomes discounted at a lower rate, increasing its present value if you transfer out.

While that can make transfer values look more attractive on paper, it does not automatically mean transferring is the right decision, said Cole.

“Giving up a guaranteed, inflation-linked income for life remains a significant step, and one that should only ever be considered with specialist financial advice,” he cautioned.

What does an interest rate cut mean for defined contribution pensions?

For those with defined contribution pensions, the impact of a base rate cut is more nuanced. This is because of how they are invested. While a base rate cut is usually positive for stocks it can mean lower income from bonds.

Cole said: “Rate cuts are often supportive for asset prices, particularly equities, which can benefit pension pots invested for growth. However, they also tend to push bond yields lower, which can affect the long-term income potential of lower-risk assets.”

This highlights the importance of asset allocation and not viewing pensions purely through the lens of short-term interest rate moves, he added.

Impact of an interest rate cut on annuities

Annuities sit somewhere in between defined benefit pensions and defined contribution pension when it comes to the effects of an interest rate cut.

After years of being largely overlooked, annuity rates have improved markedly compared with the ultra-low interest rate environment of the past decade, making guaranteed income more attractive for those who need a source of secure income.

However, annuity pricing remains closely linked to gilt yields, meaning any sustained move lower in interest rates would be expected to put downward pressure on the income available to new buyers.

Cole said: “For those considering an annuity, the trade-off between certainty and flexibility remains key, particularly in an environment where inflation and interest rates remain uncertain.”

Yet ahead of the base rate cut, gilt yields – a key indicator of annuity rates - remained stubbornly high. As a result, annuity rates remain among the most competitive seen in the past decade.

For example, at the start of this year, a Canada Life benchmark lifetime annuity purchased with £100,000 would have provided an annual income of around £6,800 for a healthy 65-year-old. Today, improved rates mean the same individual could secure approximately £7,300 per year – an increase that amounts to nearly £9,500 in additional income over a 20-year retirement, by Canada Life’s calculations.

Should I change my pension after the base rate cut?

Juggling pensions in the face of falling interest rates is no easy thing. If you have several pensions it can be worth speaking to a financial adviser so they can see the whole picture of your various pots.

Cole said: “Overall, changes in interest rates are a reminder that pensions are not a single product but a collection of long-term strategies. Decisions should be made in the context of an individual’s wider retirement plan, rather than reacting to any single rate decision in isolation.”

Retirement income today is rarely generated from a single source. It is typically built from a combination of the state pension, workplace or personal pensions, and other assets, each playing a different role.

Understanding how these different pension and non-pension income streams work – and the risks attached to each – can help you approach retirement with clearer expectations, financial advisers say.

Middle-aged Brits are sleepwalking into retirement without a plan, and time is running out, a survey has warned. Retirement income options are not being considered by 73% of 45-60 year olds, according to the study by pension provider LV.

A third (33%) of respondents to the survey aged 45 to 60 said they are unaware of financial products or strategies available to help protect their retirement income or boost their pension savings.

Sue Allen, chartered financial planner at Chester Rose Financial Planning, said: “When you retire, one of the key questions is how you will take an income. Many people find they spend more at the start of retirement as they enjoy their newfound freedom and tick off bucket-list experiences.

“Once early retirement has passed, your spending may settle down, but you might also want to prepare for higher costs in your later years in case you need to pay for care. Setting out your retirement goals could help you understand how to create an income that suits your lifestyle at different points in time.”

We look at the different retirement income options – like the state pension, defined benefit pensions versus defined contribution pensions, workplace pension and SIPPs as well as annuities, cash savings accounts, ISAs and property rental income – and how they can work together to fund your later years.

State pension – a baseline income

The state pension provides a guaranteed, inflation-linked income for life and forms the baseline of retirement income for most people.

The full new state pension (for most post-2016 retirees) is now £230.25 per week for 2025/26, or £11,973 per year, while the full basic state pension (for those born before April 1953) is £176.45 weekly – amounting to £9,175.40 a year – both increased under the triple lock, with payments made every four weeks.

Eligibility and amounts depend heavily on National Insurance contributions, requiring 35 years for the full new state pension and around 30 for the basic. You can begin claiming the state pension at 66, but the state pension age is rising.

Jude Dawute, managing director at financial advice firm Benjamin House, said: “While it provides an important level of security, the state pension on its own is generally designed to meet basic living costs, rather than support a broader retirement lifestyle.”

Pensions UK, a trade body, estimates a single person household needs £13,400 a year post-tax income to cover the basics in retirement – excluding housing costs – so while most of this will be covered by the new state pension, some other savings or income will be needed besides.

We look at how much you need for a comfortable retirement in a separate article.

Defined benefit pensions – predictable income

Defined benefit (DB) pensions provide a pre-determined income for life, usually payable from a scheme’s normal retirement age (commonly 60 or 65). The income is not affected by market movements and continues for as long as you live. You can usually take 25% tax-free as a lump sum, with the rest of the income taxed at your marginal rate.

DB pensions are typically used to meet core, ongoing expenditure, because the income is known in advance and often includes inflation protection.

So if a person, aged 65, had a defined benefit pension paying £18,000 per year and gets the full new state pension of £11,973 per year, their total guaranteed retirement income would be £29,973 per year.

“This income would be paid regardless of investment conditions or how long the person lives, providing a stable base from which other retirement decisions could be made,” said Dawute.

Defined benefit pensions are usually inflexible regarding how income is taken and at what level. However, many allow a tax-free lump sum in exchange for lower income.

Allen, from Chester Rose Financial Planning, said: “The decision whether to take a tax-free lump sum or not needs careful consideration, as once taken, it cannot be reversed. In most cases, maximising guaranteed income is preferable unless the lump sum is genuinely required.”

Defined contribution pensions – flexibility and risk

Defined contribution pensions work differently to defined benefit pensions. Instead of providing a guaranteed income, they build up a pension pot, which can usually be accessed from age 55 (rising to 57), with no requirement to retire at a fixed age.

This flexibility allows income to be tailored to individual circumstances, but it also means retirees remain exposed to several risks.

“Unless funds are converted into guaranteed income – by buying an annuity – DC pensions remain invested. Their value can therefore rise or fall with markets,” Dawute said.

A key consideration is sequence risk, he pointed out. This is the impact of taking withdrawals during periods of poor market performance, particularly early in retirement.

Dawute said: “Losses at this stage can have a disproportionate effect on how long a pension pot lasts. Diversified portfolios can help manage volatility, but investment risk cannot be removed entirely.”

Consolidation, transfers and SIPPs

Many people reach retirement with multiple defined contribution pensions, built up over different jobs.

Consolidation brings these pensions together, often into a self-invested personal pension (SIPP) or a workplace pension scheme. This can make it easier to understand your overall retirement income, manage investments consistently, and plan withdrawals.

“In some cases, individuals may also explore pension transfers from older arrangements and defined benefit pensions into newer ones with greater flexibility,” said Dawute. But he added where protected benefits exist – like guaranteed income rates – these decisions require careful consideration.

Turning defined contribution pensions into income

Deciding how much to withdraw from your pension can seem like a balancing act and there are often many factors you need to consider.

Allen said: “For example, when you access your pension, you can usually take up to 25% as a tax-free lump sum. You might be tempted to withdraw the money to travel, renovate your home, or indulge your hobbies. However, withdrawing a lump sum at the start of retirement could affect your long-term finances.

“You don’t have to take a lump sum at the start of retirement to benefit from the tax-free money – you may spread it out over several withdrawals, for instance,” she said.

Option 1: Flexi-access drawdown – adaptable income with market exposure

Drawdown allows pension funds to remain invested while income is taken as needed. It is often used to support discretionary spending, such as travel or irregular expenses, and to keep funds accessible. You typically take your 25% tax-free cash upfront.

Drawdown income is not guaranteed and is exposed to:

• Market volatility
• Inflation risk if withdrawals rise faster than investment growth
• Longevity risk if withdrawals continue for longer than expected

When you are in drawdown the sequence of your investment returns is of vital importance. In the scenario shown below, which shows a retiree with a portfolio of £100,000, taking annual withdrawals of £5,000, their portfolio could be 22% worse off if they experienced losses in the first two years of retirement, compared to having these same losses in years four and five.

Source: Quilter. Table shows a 22% difference between portfolio 1 and portfolio 2 after five years

Option 2: UFPLS – simplicity and tax considerations

Uncrystallised funds pension lump sums (UFPLS) allow individuals to take payments directly from their pension, with 25% tax-free and 75% taxed as income each time, unlike flexi-access drawdown where the whole tax-free amount is usually taken upfront.

It's a way to get money bit-by-bit without setting up a full drawdown plan or triggering the money purchase annual allowance (MPAA) on the first withdrawal and allowing the rest of your fund to keep growing.

UFPLS is commonly used for:

• One-off expenses
• Early retirement bridging until the state pension or other retirement income kicks in
• Smaller pension pots

Dawute said: “Because each withdrawal is taxed, timing and frequency can significantly affect your overall tax position.”

Option 3: Annuities – guaranteed income and annuity risk

An annuity converts pension savings into a guaranteed income, usually payable for life.

People often use annuities to cover essential spending, reducing reliance on investment markets and removing the risk of outliving their savings.

“However, annuities involve annuity risk – once an annuity is purchased, the income is typically fixed based on market conditions at that time and cannot be changed later,” said Dawute.

Inflation risk and annuities:

• Level annuities start at a higher income but lose purchasing power over time
• Inflation-linked annuities protect real income but begin at a lower level. This reflects a trade-off between higher initial income and longer-term protection against rising prices.

Other sources of retirement income

Drawing income from a range of assets can help diversify risk and improve financial resilience in retirement.

Matt Finch, director of wealth management at Bentley Reid, pointed to some non-pension assets that can boost your retirement income:

ISAs

“ISAs offer highly tax-efficient income, with withdrawals, income and growth free from tax. In many cases, it can be advantageous to utilise taxable income first to maximise allowances before drawing on ISA wealth,” said Finch.

Cash

Cash savings can provide liquidity and short-term security, reducing the need to sell long-term investments during periods of market volatility, he said.

Rental property income

Finch said: “Rental income can continue to provide a steady income stream in retirement, although it remains taxable and carries ongoing management responsibilities, which should be considered in the context of lifestyle objectives.”

Part-time work

“Part-time or consultancy work can offer a phased transition into retirement, maintaining income and reducing reliance on pensions in the early years,” he added.

Combining pension income streams

The most effective retirement income plans combine guaranteed income, flexible withdrawals and long-term growth, according to the experts.

Chartered financial planner Sue Allen said: “They are built around spending needs, health and attitude to risk – and are reviewed regularly as circumstances and tax rules change. Retirement income planning is not about finding the perfect product. It is about structuring your money so it supports the life you want for as long as you need it.”

A 65-year-old with a full state pension, NHS pension, a SIPP valued at £400,000 and an ISA of £100,000, who is continuing to work until 67, could have a retirement income portfolio that looks something like the below, she said.

In early retirement, income is topped up from the SIPP and ISA to support higher spending. Once the state pension and NHS pension payments begin, reliance on the SIPP reduces.

Later in life, income needs decline further, and guaranteed income covers most spending, while modest withdrawals continue to provide flexibility.

“The aim is not to maximise income early on but to keep the income sustainable and tax-efficient,” Allen said.

A quarter of a million more 60 to 64-year-olds are now in relative income poverty compared to 2010 when the state pension age began rising, according to new analysis, provoking hard questions for the government about the impact of further increases.

There has been a marked jump in financial insecurity among people in their early 60s as the state pension age has been pushed higher over the past 15 years, the report from the Standard Life Centre for the Future of Retirement found.

The poverty rate for 60 to 64-year-olds has increased from 16% in 2009/10 to 22% in 2023/24, according to the research.

Meanwhile, when the state pension age rose from 65 to 66 between December 2018 and October 2020, the percentage of 65-year-olds in income poverty more than doubled from 10% to 24%.

Further raises are likely to have the same impact unless changes are made, the report’s authors said.

Patrick Thomson, head of research analysis and policy at the Standard Life Centre for the Future of Retirement, said: “For the first 60 years of its existence the state pension age stayed the same. Since 2010 it has been rising in more years than not, and a growing number of people are falling into poverty as they wait for a higher state pension age.

“Next year we will begin to see another rise from 66 to 67 which will save £10 billion a year but have knock-on costs and consequences for poverty levels.”

We look at how much you need for a comfortable retirement in a separate article.

State pension age will rise from April

The next rise in state pension age kicks in from April 2026, gradually reaching 67 for both men and women by 2028.

This relatively fast increase in state pension age since 2010 has happened at the same time as big demographic change. There are now 8 million people in the UK in their 60s, up from 6.7 million in 2010, and this is expected to peak at 8.7 million in 2031, according to the report’s analysis.

Within this large cohort, pre-retirement poverty is predicted to rise further as the state pension age begins to increase again next year. Thomson said: “The change will come at a huge cost to some.”

He added: “Our research with the public shows that most people accept that the state pension age may need to rise over time, but this needs to be done in a way that is seen as fair between generations.

“Any further increases must be matched by clear policies to help people stay in good work for longer and protect those who cannot,” he said, warning, otherwise, more people could face a long period of financial insecurity before receiving the state pension.

State pension age hikes leave some people working for longer

Many people have responded to a later state pension age by working for longer.

The report finds the employment rate for 64-year-olds has risen from 34% in 2013 to 54% today. But this is largely among people who were already in work.

Those who leave the labour market in their 50s and early 60s remain unlikely to return, increasing their risk of low income, the report found.

Meanwhile latest figures out today showed UK unemployment has hit its highest level in almost five years.

Will the state pension age go higher?

The government is currently engaged in a State Pension Age Review, to gauge any future increases in the age at which people can receive the benefit.

It has also revived the Pensions Commission in a bid to tackle the “retirement crisis that risks tomorrow's pensioners being poorer than today's”. It warns that too many working-age adults (45%) save nothing at all into a pension.

But increasing the state pension age when people are already undersaving for retirement will do little to improve pensioner poverty.

Standard Life is calling on the government to redirect some of the savings from the state pension age rises into policies focused on helping people to work for longer, allowing them to save more for retirement.

The report also recommends providing better support to people to help them make good decisions when it’s time to access their pension savings. In combination these policies could help both individuals and contribute higher economic activity and tax revenue, the report said.

Thomson said: “We know that there is a good chance that 66 year olds will see their rates of poverty double over the next few years unless we take action.

“We will spend £10 billion less on them each year [because of the state pension age rises], and could target some of that to help people to stay in good work in their 60s and to cushion the impact on those most at risk.

“The state pension matters to people, and we need to build public confidence in a fair system for today and for tomorrow”.

Could you benefit from a pension review?

Relying on the state pension alone is not typically enough to fund a retirement.

Outside increasingly rare defined benefit pensions, private pensions like a SIPP or workplace pension remain the most tax-efficient way to build a bigger retirement pot, despite constant tweaks by successive governments. Contributions attract tax relief at your marginal rate, and investments grow free from income tax and capital gains tax – though withdrawals are taxable.

Basic-rate taxpayers receive 20% relief on contributions, rising to 40% for the higher-rate, and 45% for the additional-rate, making pensions a powerful tool to turbocharge retirement savings.

An annual pension review can be the wake-up call needed to get retirement plans on track, whether you do it yourself or seek professional advice.

Take full advantage of employer perks such as higher employer matching or salary sacrifice schemes, which remain highly tax-efficient but the amount that is exempt from National Insurance contributions will be capped at £2,000 from April 2029.

Don’t forget ‘carry forward’ rules to use unused pension allowances from the past three tax years. This means a large bonus or inheritance, for example, might allow you to make contributions well above the £60,000 annual allowance – but only if you have relevant earnings that at least cover the total pension contribution.

If all carry forward allowances were available, the highest earners could potentially pay up to £220,000 into a pension this tax year.

Finally, review your investment mix and risk level to ensure they still suit your goals.

Retirement may seem a long time away but it can feel more immediate when you calculate how many pay days you have left to actually contribute to a pension pot and fund your golden years.

Research by Aviva found few people consider the actual number of pay days left to build their retirement savings, with a quarter of workers – the equivalent of around nine million people – having no idea how many pay days remain before they intend to stop working.

With typical cost of a comfortable retirement at £43,900, it is important to find a reliable source of income to replace your regular salary beyond the state pension once you retire.

But Aviva’s analysis suggests a lack of preparation, particularly among older generations who don’t have as much time to save, with many overestimating how many paydays they have left to save into a pension.

Alistair McQueen, head of savings and retirement at Aviva, said: “Counting pay days is a simple but powerful way to bring retirement planning into focus.

“Many people overestimate how long they have left to save, which can lead to shortfalls later. Thinking in terms of paydays makes the challenge feel more real and immediate.”

The importance of counting the paydays until your pension

Knowing when you want to retire and how much you need is an important part of retirement planning.

But it is also important to know how much time you actually have to save into a pension.

Aviva found that almost a third of those aged 55 and over admit they don’t know how many pay days they have left, and amongst those aged 45 to 54, the figure rises to 35%.

However, some older workers drastically overestimate the time they have left to save, the insurer said.

The research found 17% of people aged 55 and over, who could claim their state pension in around 12 years, believe they have more than 250 pay days left – the equivalent to 21 years of monthly pay cheques when in fact they only have 144.

A further one in 20 think they have more than 500 pay days left, which would actually mean working for another 41 years.

There is some good news for future generations though. Younger workers appear more proactive than most, with more than a third of 25 to 34-year-olds having already calculated their remaining pay days, the highest proportion of any age group.

McQueen added: “If you believe you have hundreds of pay days left, you may delay acting – but the reality is often very different. We encourage everyone to take stock now, review their pension contributions, and consider what steps they can take today.”

The importance of being prepared for your pension

It is not just timing that people are unprepared for. A quarter of people admitted they didn’t know how much they would need in their pension pot by the time they retire. Almost a third believe they could live on less than £250,000 – a figure that would buy an annuity of around £13,700 a year at today’s rates, or £1,145 per month.

Analysis by Quilter for MoneyWeek suggests a single person would need a much larger pension pot worth £738,000 to generate enough for a comfortable retirement from an annuity. A couple would need £929,000.

Habits also vary when it comes to monitoring progress in pension performance, according to Aviva.

One in six said they never check their pension pot and a further 17% only check it annually. Half say they do review their savings quarterly or more, with younger workers leading the way. Two thirds of 25 to 34-year-olds said they check their pension at least quarterly and 17% check on a weekly basis.

McQueen said: “The sooner you start planning, the better prepared you’ll be for the retirement you want.”

Pension savers are choosing passive funds and individual shares for their portfolios, and taking bigger tax-free sums earlier from their pots, as they navigate a changing retirement landscape.

This is the finding of a large pension study by Interactive Investor (ii), the UK’s second biggest investment platform with more than 500,000 customers.

It looked at the behaviour of its self-invested personal pension (Sipp) investors both now (during the second and third quarters of 2025) and in the past.

The study shows that passive funds are in fashion, with allocations to exchange-traded funds (ETFs) increasing for those saving for retirement and those withdrawing money from their Sipps.

Interestingly, it also found that customers bought more individual shares, with allocations at their highest level in three years (since the first quarter of 2022).

However, pension investors also enjoy low-risk, cash-like returns. The most popular fund among ii’s customers is the Royal London Short-Term Money Market Fund. Indeed, five of its ten top-selling funds last month were money market funds.

Money market funds have been particularly popular over the past year or so, as investors sought high interest funds off the back of a high Bank of England base rate (though the base rate is now declining).

Over at AJ Bell, another investment platform, the Royal London money market fund has been its fourth best-selling fund so far in 2025. Cash funds and money market funds also dominate the most-bought investments on the Fidelity platform.

ii noted in its Sipp study that retired customers taking cash out of their portfolios are choosing money market funds: a money market fund is now the most popular holding for customers in pension drawdown for the first time.

In terms of investments that have fallen out of favour, demand for investment trusts is cooling. Investing in trusts reduced for customers saving into their Sipps, and even further for those in drawdown, according to ii.

A changing pensions landscape

The findings come as pension savers grapple with a raft of upcoming changes. Pensions are set to be included in inheritance tax calculations from April 2027. A year later, in April 2028, the age at which you can start withdrawing money from your pension will rise from 55 to 57.

Meanwhile, the Autumn Budget announced that salary sacrifice pension contributions above £2,000 will face National Insurance from April 2029.

The run-up to last month’s Budget caused a rush among older pension savers to grab their tax-free cash in case the chancellor reduced it or introduced a cap. In the end, no changes were announced.

Interactive Investor’s study shows that customers took a slightly earlier and bigger tax-free lump sum on average this year, compared to its previous Sipp study, possibly due to worries over the Budget.

Looking ahead, Kyle Caldwell at Interactive Investor thinks investment trusts could come back into fashion.

He says that high interest rates have reduced demand for investment trusts while boosting demand for gilts and money market funds. “Another factor at play has been the continued strong performance of global stock markets, which has led some investors to seek out global ETFs, which provide the return of the market for a low fee.”

Caldwell notes: “While time will of course tell, the coming years could see increased appetite for investment trusts. Interest rates are falling, which could see investors increase risk in their pursuit of growing money in real terms given that this will dent the income attraction of lower risk assets like cash and bonds.”

Savers and investors are being urged to use a new tool to beat scammers after figures suggested close to a million people had pension and investment money stolen by fraudsters last year.

Around 800,000 people are suspected to have lost money to investment scams or pensions‑related fraud in the 12 months to May 2024, according to Financial Conduct Authority (FCA) research. The findings were extrapolated from a survey of 17,950 people, representative of all UK adults.

Investment fraud occurs when a criminal convinces their victim to move their money to a fictitious fund or to pay for a fake investment. For example, a fraudster may convince you of huge potential returns on your investment if you send them money. Victims lost millions more to investment fraud in 2024, despite the number of cases dropping.

Pension fraud can also involve dodgy investments, like fake fine wine scams, as well as fake promises of being able to access your retirement fund before age 55.

In a bid to fight this prolific financial crime, the watchdog has launched a tool to help consumers avoid scams. It is called ‘Firm Checker’.

Savers and investors can use the tool to check if a firm is actually authorised and has the correct permissions to provide the services it is offering.

The FCA believes by using this tool people can significantly reduce their chances of falling victim to fraud.

Sheree Howard, executive director of authorisations at the FCA, said: “Ruthless fraudsters are constantly evolving their tactics so they can steal money from innocent victims.

“Whether you’re considering an investment, pension opportunity, loan or other financial service, use Firm Checker to confirm the firm is authorised and help fight financial crime.”

How pension and investment scammers operate

Fraudsters use both old and new technology to try to entice their victims to part with their money.

Those in the FCA survey who had experienced authorised push payment (APP) fraud – where a fraudster tricks a person into making a payment to a fraudulent account – or unauthorised consumer investments or pensions-related fraud, were most likely to have heard about it by seeing it promoted on social media (17%) or via a telephone call (17%).

Sixteen per cent were initially approached via text message, WhatsApp or another messaging service.

Scammers can make it difficult for consumers to know if they are dealing with the real firm. In fact fraudsters have even been known to pretend to be the Financial Conduct Authority, targeting thousands of people and stealing from hundreds.

Famous people, like internet icon and Dragon’s Den star Steven Bartlett, are also regularly impersonated by scammers trying to steal money from their followers.

Before going ahead with a financial transaction like an investment or pension transfer, consumers are being warned to check if a financial services firm is authorised by the FCA for the services being offered – but people should also confirm that the contact details match those listed on the FCA Firm Checker.

The research also found consumers are taking some precautions to protect against fraud but there is room for improvement. Around three in four (72%) adults said they always or usually reject or ignore unsolicited calls, emails or text messages about investment or pension opportunities.

Six in 10 (60%) consumers reported that they always or usually verify the authenticity of emails, messages or calls before providing personal or financial information.

Despite this, more than £600 million was stolen by fraudsters in the first half of 2025, as scam cases surged across the UK, according to UK Finance.

From pensions fraud, investment scams to banking account theft – criminals pocketed £629 million from unsuspecting victims – a 3% rise on the same period in 2024. Meanwhile, there were over 2 million cases of fraud - a 17% hike from the first half of 2024.

More than three million pension savers will be hit by changes to salary sacrifice on contributions.

Chancellor Rachel Reeves used her Autumn Budget last month to announce a £2,000 cap on the amount workers and their bosses can add into pensions via salary sacrifice before being hit with National Insurance (NI) charges.

Capping NI relief on salary sacrifice to the first £2,000 is expected to raise £4.8 billion for the Treasury in 2029/2030 and £2.5 billion in 2030/2031.

That may be nice for the nation’s finances but a government impact assessment published this week shows 3.3 million workers who use salary sacrifice to make pension contributions will be affected and could face higher tax bills.

That is higher than it previously estimated just last week in the Autumn Budget document.

What are the pension salary sacrifice changes?

Salary sacrifice is a popular way for employees to make pension contributions.

Money is put into their pension pot from their gross pay, adjusting their net income. This reduces the payroll taxes paid by an employee and employer.

Government guidance shows the cost as a relief has increased markedly from £2.8 billion in forgone National Insurance contributions in tax year 2016/2017, rising to £5.8 billion in 2023/2024.

Without any change, it is expected that this would almost triple to £8 billion by 2030/2031.

To combat this, a £2,000 salary sacrifice contribution limit will be introduced from 6 April 2029. Any salary sacrificed for pensions above this limit will attract Class 1 primary NI contributions for employees and Class 1 secondary NI contributions for employers on the relevant amount.

Who will be affected by pension salary sacrifice changes?

Government data suggests that an estimated 7.7 million employees currently use salary sacrifice to make pension contributions.

Of these, 3.3 million sacrifice more than £2,000 of salary or bonuses.

This means 44% of employees using salary sacrifice for pensions would be impacted by the changes, while 56% around 4.3 million people remain protected by the £2,000 threshold.

However, the Budget document had estimated that just 26% would lose out from the changes.

The average additional employee NI contribution liability is estimated to be £84 in the first year of impact.

The guidance recognises that some individuals may seek to reduce the amount of salary sacrifice pension contributions they make to limit the impact of these changes.

However, the document doesn’t mention any impact caused by the disincentive to contribute more into a pension if it means a higher tax bill.

Nicholas Nesbitt, private client partner at financial consultancy Forvis Mazars said this may actually disproportionately hit those earning under £50,270, as they will be paying eight per cent NI where they are aiming to save well for their future. However, higher earners with incomes over £50,270 would see just a two per cent cost on their contributions.

He said: “Many employers pass on NIC savings as further pension contributions for their employees and removing these reliefs could cut employees’ pension savings further.

“That said, a lot can change in four years, and while workers should plan for the changes, the landscape may be different by April 2029.”

Additionally, former pensions minister Steve Webb, now a partner at consultants LCP, warned the number of losers could be greater if employers respond to the change by making pension provision less generous for all workers.

He said: “A Budget measure that was largely seen as complex and technical could have significant real-world implications for millions of workers. At a time when the nation as a whole has a significant ‘under-saving’ problem, this change will make matters worse.

“On the Government’s own estimates, around three in seven of the workers who use salary sacrifice to pay into their pensions will be hit by the change, whilst employers will face a bigger hit because of their higher rate of National Insurance Contributions.

“Although employers have time between now and 2029 to consider their options, there is a risk that some will simply cut back on the generosity of their workplace pension offering, which would be a serious backward step.”

Employers still have a couple of years to contribute into their pension without any caps but they are being urged to keep on saving after 2029.

Laura Suter, director of personal finance at AJ Bell, said: “Despite the NI savings being limited, what you pay in will still be exempt from income tax and workers can still enjoy pension tax relief up to their marginal rate of income tax.

“What’s more, making pension contributions to schemes like SIPPs will still reduce your ‘adjusted net income’. This is important as it can pull you out of higher rate taxes or one of the many punishing tax traps while also boosting your retirement savings.”

MoneyWeek editors Budget 2025 special episode
In this special Budget episode of the MoneyWeek Talks, MoneyWeek editors Kalpana Fitzpatrick, Andrew Van Sickle and Cris Sholto Heaton chew over what was announced and what it means for savers, investors, workers and homeowners. We gave the Autumn Budget a big thumbs down — but why?

MoneyWeek Talks is a podcast that helps you unlock the secrets to financial success. Editors Kalpana Fitzpatrick and Andrew Van Sickle are joined by influential guests – from CEOs and entrepreneurs to economists and policymakers – to share their top tips on managing money, investing wisely and building wealth.

Subscribe to the MoneyWeek Talks podcast and get ready to make it, keep it and spend it with confidence.

More budget news

• Budget 2025: the winners and losers
• Autumn Budget 2025: what was announced?
• Autumn Budget quiz: How closely were you following Rachel Reeves’s tax-raising speech?
• The Autumn Budget as it happened: updates and analysis from the MoneyWeek team