Unlocking retirement – 4 of the most asked retirement questions and expert answers

Retirement is a complex area that can leave you with lots of questions. There’s information everywhere, but getting answers you can trust can be hard to find. Going online can bring up a whole host of out-of-date and inaccurate information that could cause you problems if you based your retirement decisions on it.

Here’s a look at some of the most common retirement questions people ask online, and expert answers you can trust.

This article isn’t personal advice. What you do with your pension is an important decision. You should check that you understand your options.

The government’s Pension Wise service can help if you’re over 50 and need guidance. You can also get personalised financial advice if you need it. Pension and tax rules can change, and any benefits depend on your circumstances. Remember, you can't usually access money in a pension until you're 55 (rising to 57 in 2028).

How much do I need to retire?

Almost eight out of 10 people don’t know the answer to this question. And that’s because it’s tricky to calculate future costs.

Thankfully, the Pensions and Lifetime Saving Association (PLSA) has come up with three retirement income standards which can serve as a useful guide.

To achieve a ‘minimum’ standard of living (for those living outside London) the PLSA suggest a single person will need £12,800 a year, or £19,900 for a couple.

This amount of income would cover your basics, with a small amount left for fun and social occasions.

Remember your retirement income is likely to come from various sources, including the State Pension, your workplace and private pensions, ISAs, investments and any cash savings you have.

For a ‘moderate’ standard of living, the target is £23,300 a year for a single person and £34,000 for a couple.

This would afford you a little more flexibility in your spending, like being able to run a car and go on a holiday abroad every year.

For a ‘comfortable’ standard of living with more holidays, home improvements, and more lavish spending, it’s estimated to cost £37,300 for a single person and £54,500 per year for a couple. For those living in London, these figures will be higher.

More on these standards

Once you’ve decided how much income you’ll need to retire, our pension calculator will help you work out what your pension could be on track to pay you. From there, you can then work out any shortfall.

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What is a SIPP?

A SIPP is a Self-Invested Personal Pension plan.

One of the main advantages of a SIPP is that it lets you take control of your pension. It puts you in the driving seat when it comes to choosing and managing your investments.

In fact, just under half of those with a SIPP say they chose to invest in one because of the flexibility they offer in the way money is invested.

In other personal and workplace pensions, members will often rely on the provider to decide where they’re invested through a default fund.

With a SIPP the choice is yours.

A SIPP typically offers a wider range of investments than other personal and workplace pensions. This could help you grow your retirement savings and give you access to more opportunities and potentially greater returns over the long term.

But you must be comfortable managing your pension on your own and accept the risks of investing.

Remember, although there’s the potential for growth, all investments can fall as well as rise in value, so you could also get back less than you invest.

More on the HL SIPP

What is an annuity?

An annuity is an insurance product that exchanges your pension for a secure annual income, that’s guaranteed for life.

You can get annuities that will continue to pay out an income to your spouse/civil partner when you die. These are known as joint-life annuities.

You can also get an enhanced annuity that takes account of your health and lifestyle. Unlike other insurance products, if you’re in poorer health you could get a higher income as a result.

It’s important to explore your options, so you get an annuity that’s suited to exactly what you need as once set up it cannot usually be changed.

More on annuity options

Different providers offer different rates, so it’s vital that you shop around to get the best deal.

Our online annuity tool helps you compare rates from all UK annuity providers on the open market. Your current pension provider is unlikely to offer you the best rate and rates can expire or change, which means it makes even more sense to shop around.

Annuities previously fell out of favour as they were seen as being inflexible and offering poor value for money. However, in recent years their fortunes have revived.

For example, a 65-year-old with a £100,000 pension could now get up to £7,317 a year of secure income. The maximum was only £4,941 just two years ago.

These annuity quotes are run for a 65 year old married man, on a single life basis, with no increases and a 5 year guarantee period.

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How long does my pension need to last?

The answer is probably longer than you think.

The number of centenarians (aged 100 or older) is on the rise. In 2021, there were 13,924 centenarians living in England and Wales, almost a quarter increase from 2011.

Babies born in 2021 have a life expectancy at birth projected to be 90.5 years for females and 87.6 years for males. So, you could potentially be living 30 or even more years in retirement. That means your income might need to last 30 years or more too.

You can use tools like our drawdown calculator to help you work out what income withdrawals might be sustainable. You can also see how different growth rates and life expectancies could affect how long your pension lasts.

Try our drawdown calculator