Whether it is to spend more time with your family, get stuck into a new hobby or exploring new destinations, many of us would like to retire early. But with rising living costs and a later state pension age, achieving early retirement requires careful planning and smart financial decisions.
Retiring early means stopping work before you reach the state pension age, which is currently 66. With people living longer, your retirement savings will need to last for decades, making it even more crucial to plan wisely.
Start Planning as Early as Possible
Whenever you plan to retire, you’ll need enough savings to support you for the rest of your life. In the UK, average life expectancy is 79 for men and 82 for women*—but you could live much longer, so your pension pot will need to be able to go the distance.
The earlier you start saving, the more time your money has to grow. Thanks to compound interest and long-term investments, even small savings can add up significantly over time.
Check your State Pension Forecast
Your state pension provides a guaranteed income, but you can’t claim it until you reach state pension age. Currently, this is 66 and will rise to 67 between 2026 and 2028.
To retire before this, you’ll need to bridge the gap before your state pension kicks in. Check your state pension forecast on the government website to see how much you’re on track to receive. You need 35 years of National Insurance contributions to qualify for the full amount. If you have gaps in your record, you may be able to make voluntary contributions to boost your entitlement.
Think about your Retirement Lifestyle
Think about how you want to spend your retirement. Will you spend a lot of money, potentially travelling or purchasing new things, or do you plan to live a quieter life? Your financial needs will vary depending on your lifestyle, so it’s essential to estimate your future expenses, including household bills, travel, and hobbies.
Increase your Pension Contributions
Increasing your contributions, whether regularly or through one-off payments, can have a significant impact.
Many employers offer salary sacrifice schemes, which allow you to make pension contributions before tax, reducing your taxable income. Some employers even match extra contributions - so check if yours does!
Consider opening a Self-Invested Personal Pension (SIPP)
A SIPP offers greater flexibility over how your pension is invested. Unlike workplace pensions, you choose where your money is invested and can adjust your strategy over time. While it carries risks, it can be an effective way to grow your retirement savings.
Find all your Pensions
Many people accumulate multiple pensions throughout their careers. If you’ve changed jobs over the years, you might have old workplace pensions you’ve lost track of. The government’s Pension Tracing Service can help you find them.
Make the Most of Tax Relief
Pension contributions come with valuable tax relief. If you’re a basic-rate taxpayer (20%), every £80 you contribute becomes £100 in your pension. Higher-rate (40%) and additional-rate (45%) taxpayers can claim even more, though anything above the 20% basic rate must be claimed through HMRC.
Seek Professional Financial Advice
Retirement planning can be complex, so getting expert advice can help you make the best decisions for your future. A financial adviser can help you maximise tax efficiency, investment returns, and pension contributions.
