How to Prepare to Retire on a SIPP (Self-Invested Private Pension)

Financial decisions don’t stop when you hit your 60’s. Having wisely invested your money throughout your career, you now have several choices to make at retirement age, if you want to make the most of your money.

Instructions

Difficulty: Moderately Challenging

1. Start planning as soon as you are able to. If you're thinking of retiring early, bear in mind that your pension will have had less time to build up and must be paid out for longer, so you could be living on a lower income than you might expect.
2. Look at all your potential sources of income in retirement. These could include different pension plans, savings, investments or insurance policies. Check through any paperwork you have that relates to old pension schemes. Pull as much information together as possible before you retire, it will help you have a clearer idea of what money you'll have coming in once you've retired
3. Check with your pension provider if they plan to increase the minimum retirement age on your policy any time soon. Originally, you could retire at 50 with a SIPP, but this will go up to 55 at before 2010.
4. Don’t stop work (unless you want to!) You don't have to stop work to start drawing a personal or stakeholder pension. You can draw a pension from your employer's occupational scheme and carry on working so long as the scheme rules allow this.
5. Don’t forget to consider your partner and dependants (if any) when making financial arrangements.
6. Don’t expect pension providers to automatically track you down to pay your pension. Make it easier for them and you by getting in touch.
7. Decide if you want to take a tax–free lump sum. For money purchase schemes you can usually take up to a quarter of your pension fund. Check how this will affect the pension or annuity you will get.

Tips & Warnings

• Consider reducing your borrowing costs in your retirement, for example any outstanding credit or loans. Watch out for early repayment charges which some providers may charge if you pay a loan or mortgage off early. Depending on the cost of the loan and the savings rate available, it may be better to repay debt than to save, unless you think you may need that money later.
• Don’t put off your retirement planning – the sooner you know where you stand, the sooner you can get things sorted out if you need to