Approaching retirement is a natural point to take stock. You might have several pension pots, changing priorities, and bigger questions about how to turn savings into a dependable income. This guide sets out the mistakes we see most often and how to avoid them.
At a glance
- Start with a simple audit: what pension pots you have, where they are, fees, and any guarantees.
- Build an income plan, not just a “big round number” target.
- Consider consolidating old pensions carefully.
- Match investments to timeframes; keep near-term spending low-risk and longer-term money invested.
- Use tax allowances wisely (incl. State Pension, NI record and order of withdrawals).
- Get help when complexity rises, you don’t have to DIY everything.
First, know what you’ve got
As you approach retirement, it’s common to hold several pension pots:
- Workplace pensions from past and current employers, usually defined contribution.
- Personal pensions and SIPPs that you set up yourself. A SIPP (Self-Invested Personal Pension) is a type of personal DC pension where you choose the investments. Your money is invested to grow a lump sum for retirement
- Defined benefit or final salary schemes. Rare for new savers, but many in their 50s still have a defined-benefit pension from a previous employer. These pay a guaranteed income based on your last salary and service length. They are valuable but often complex if you switch jobs or consider transferring out.
- The State Pension, based on your National Insurance record. For most people, full State Pension requires 35 qualifying NI years
List each pot, who the provider is, the value, the fees and how it’s invested. Check any guarantees or special features in older policies. This simple audit often reveals quick wins before you do anything else.
Many retirees discover too late that small planning errors have big impacts. Below are the top mistakes people make – and how to avoid them:
Mistake 1: Assuming a vague number will be “enough”
A round figure like “£250,000 should do it” can be misleading. Your real target depends on when you’ll retire, the lifestyle you want, your other assets, expected State Pension, and how long the money needs to last.
What to do instead
Build an income plan, not just a pot target. Map your must-have spending, nice to have spending and one offs like a new car or home updates. Sense-check your plan against realistic return and inflation assumptions. A good financial adviser will model the chances of your money lasting under different market conditions. If you prefer to read first, our piece on 3 common investing mistakes explains why overconfidence and unrealistic return assumptions trip people up.
Are you saving enough into your pension for retirement?
A pension figure such as £250,000 or £1 million means very little without the context of your retirement age and spending plans. Our retirement readiness checker gives you a simple illustration of how your current defined contribution pension savings compare with the lifestyle you are aiming for.
Mistake 2: Leaving old pensions scattered
It’s common to collect four or five pots across a career. The danger is duplication, forgotten funds and higher overall fees.
What to do instead
Consider consolidating your pensions into a modern, lower-cost arrangement that offers suitable investment options and flexible access.
But take care:
Some older policies have valuable guarantees and defined benefit schemes offer secure income that is hard to replicate. Always assess benefits before moving anything.
Mistake 3: Treating all investments the same
As retirement approaches, the mix that worked at 40 may be wrong at 60. Too much equity risk can force selling in a downturn; too much cash lets inflation erode spending power.
What to do instead
Match your portfolio to your timeframes. Money you’ll need in the next two to five years should be low risk and liquid. Longer-term money can stay invested for growth. Review at least annually and after major life changes.
Further reading: Our article on 3 common investing mistakes covers chasing past performance and neglecting diversification. If you do your own investing, check DIY investing for a balanced view on when a hands-on approach works and when professional oversight adds value.
Mistake 4: Grabbing the 25% tax-free cash without a plan
The 25% tax-free element is attractive, but taking it all at once without a plan can create unintended tax and investment consequences.
What to do instead
Be clear on why you want cash. If it’s for debt repayment, renovations or helping family, consider staged crystallisations to smooth tax and market risk. Coordinate with ISA allowances to keep more future income tax-efficient.
Our Chartered Financial Planner, Daniel Boden speaks about whether you should take your 25% tax free lump sum in this video:
Mistake 5: Drawing down too quickly
A pension pot is not a bank account. Large, fixed withdrawals ignore longevity, market cycles and sequencing risk.
What to do instead
- Start with a sustainable range (not one rigid number).
- Use guardrails so withdrawals flex after good/weak years.
- Hold 1–2 years of planned withdrawals in low-risk assets to avoid forced equity sales after falls.
Mistake 6: Ignoring the State Pension and NI gaps
People often assume they will get the full State Pension, only to discover missing National Insurance years.
What to do instead
Check your State Pension forecast and NI record on GOV.UK; consider whether voluntary NI to fill gaps is cost-effective for you. (Rules and windows can change.)
Mistake 7: Overlooking the order of withdrawals and tax bands
Taking income from the wrong place at the wrong time can push you into a higher tax band or reduce future allowances.
What to do instead
Coordinate pension withdrawals with salary, dividends, rental income and ISA holdings. Use personal allowance, basic and higher-rate bands wisely. Consider deferring some pension income while using ISA cash or cash reserves in a high-income year. If you have started flexible access, remember the Money Purchase Annual Allowance reduces how much you can pay back into pensions with tax relief. Careful sequencing keeps more of your money working for you.
Mistake 8: Doing everything alone when it stops being simple
DIY can work when things are straightforward; it’s harder with multiple pots, tax bands, drawdown choices and legacy planning. That’s when it might be time to find a financial adviser.
What to do instead
Decide where DIY adds value and where advice pays for itself through better structure, fewer mistakes and time saved. Our DIY investing article sets out a useful checklist. Many clients choose a hybrid approach: keep a “fun” ISA or a small SIPP to scratch the investing itch, and let us manage the core retirement strategy.
Pulling it all together: a simple framework
- Audit your pensions, costs and investment mix.
- Plan income around needs, wants and one-offs.
- Structure pots for near-term and long-term money.
- Use tax allowances sensibly each year.
- Review annually, or after major life events.
- Sense check investing choices; seek advice as complexity grows.
How Abode Financial Planning in Cirencester can help
We’re a Chartered, independent financial planning firm based in Cirencester. If you search for pension advice Cirencester, you’ll find a range of options. We’ll:
- Pull all your pension pots into a clear lifetime cash-flow.
- Model safe withdrawal ranges and tax-efficient sequencing.
- Align investments to your near-term and long-term financial goals.
- Provide ongoing reviews so your plan stays on track.
Ready to talk pension advice?
Book a free, friendly discovery call. We’ll review your pensions, iron out the snags and build a clear, tax-efficient income plan that fits your life in the Cotswolds.
FAQs
How do I find all my old pensions?
Start with payslips/P60s and letters from past providers; use the government’s Pension Tracing Service if you’re unsure who holds a pot. Then list provider, value, fees and features before deciding whether to consolidate.
Should I always take 25% tax-free cash at once?
Not necessarily. If the money isn’t needed, staged withdrawals can reduce tax/market risk and keep more invested for growth.
What’s a sensible pension withdrawal approach?
Many retirees use a guardrails method with a cash buffer to reduce selling after market falls, reviewed annually. The “right” rate depends on your portfolio, spending, tax and flexibility.
How does tax relief work on pension contributions?
When you contribute to someone else’s pension, they automatically receive 20% tax relief. If the person is a higher-rate taxpayer, they can claim additional tax relief through a self-assessment tax return. For example, if you contribute £2,880, the recipient will receive £720 in tax relief, bringing the total contribution to £3,600.
Can I still fill missing NI years for the State Pension?
Often yes, but it’s time sensitive and case specific. Check your forecast and NI record on GOV.UK and weigh the cost/benefit for your circumstances.
Investment risk information
Please note, the value of investments, and the income from them, may fall or rise and investors may get back less than they invested.
This information is for general information only and does not constitute advice. The information is aimed at retail clients only.
Past performance is not necessarily a guide to future performance.
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