Could I retire earlier?

Lauren Morton | 12/09/2019



Many of us dream of taking early retirement but turning this dream into reality requires some careful financial planning. Whilst the date at which you can start claiming your State Pension can’t be brought forward, you can usually start taking benefits from a defined contribution or money purchase pension once you reach the age of 55 (57 from 2028).

However, if you are planning on stopping work and accessing your pension early, you’ll need to be certain that you’ve got enough to provide you with an income for the rest of your life. Here, we look at some of the steps you may want to consider if you’re hoping to retire early.

Remember though, pensions can be complicated, so if you’re not sure about anything, or aren’t confident going it alone, it’s a good idea to seek professional pension advice.

Work out how much you'll need

A useful starting point if you’re thinking of retiring early is to work out how much exactly you’ll need to live on.

Our Pension Calculator can help you pinpoint how much you’ll need to live the retirement you want, whether that’s a modest or more comfortable retirement. By modest, we mean enough to provide you with one holiday in the UK a year, food bought from budget grocery stores, and low-cost clothing. You’ll also be reliant on the NHS, plus public transport or an older car. A comfortable retirement would provide you with enough for an annual package holiday abroad, food from higher end grocery shops, quality clothing from high street brands and a newer car.

Once you know how much you’re likely to need, you can start planning for the retirement you want. Bear in mind that the amount you’ll receive from the State Pension will depend on how many years national insurance contributions you’ve made. The current full State Pension in the 2019/20 tax year is £168.60 a week but you’ll need 35 qualifying years of national insurance contributions to qualify for this amount when you reach State Pension age.

You can check what age you can start claiming your State Pension using the Government’s State Pension age calculator.

Top up your savings

If you’re hoping to retire early, you may want to consider topping up your pension savings whenever you can afford to. Just an additional £100 a month will give your pension savings a big boost. Over just 10 years, that’s £12,000 extra into your pension and that’s without even factoring in growth and the tax benefit of saving into a pension. This can be the difference between retiring at least one year earlier.(1)

If you’ve been auto-enrolled into your employer’s company pension scheme, a set amount from your salary will already be going into your pension each month, but you can pay in more if you want to. You should also see if your employer will match any extra payments you make.

If you pay into a personal pension, perhaps because you’re self-employed and don’t have access to a company scheme, you can pay as much as you want into your pension each year. However, the maximum amount that you can claim tax relief on is 100% of your earnings or something known as your annual allowance, currently £40,000, whichever is lower.

Check your fees and charges

Paying more into your pension isn’t the only way to increase your chances of retiring early. Reducing the charges you pay on your pension can also boost the amount you end up with in retirement.

For example, reducing your total pension charge to 0.4% a year from 1.2% could save you £18,239 over 20 years, (based on a pension value of £50,000 growing at 5% a year) which could mean you’re able to retire two years earlier.1 This could potentially allow you to retire a year or two early, depending on how much income you’re going to need.

If your pension has high charges, you might want to think about transferring to a plan with lower fees. Find out more about how transfers work in our blog ‘Transferring your pension - what are the options?’

If you’re uncertain how to proceed, or whether transferring is the right thing to do, always get professional financial advice first.

Track down missing pensions

On average people have 11 jobs in their lifetime (2), often setting up a new pension each time they join a different company.

It can be easy to lose track of your pensions over time, especially if you’ve moved house and forgotten to notify your pension providers. According to Profile Pensions research, 27% of people don’t even know the providers that hold their pensions.(3)

As many as 1.6m pension pots worth £19.4bn are thought to be unclaimed, research has found , so it’s worth checking to see if you might own a share. (4) Check out our blog Could you own a share of the UK's £20bn lost pensions mountain? to find out how to go about tracking down any pensions you might have lost or forgotten about.

Check where your pension is invested

It’s really important to know where your pension savings are invested if you want to be certain your money is working as hard as it possibly can for you.

According to our analysis, if your pension savings were to grow by an extra 1% a year, this could give you an additional £22,649 over 20 years, possibly enough to retire 2 and a half years earlier (5). This assumes a pension value of £50,000 growing at 5% & 6% respectively with charge of 1% applied.

Your contributions will usually be paid into what’s known as a ‘default fund’ unless you’ve let your provider know you’d rather your money was invested elsewhere. Default funds are generally ‘multi-asset ‘funds, which mean they invest in lots of different assets, such as shares, property, bonds and cash.

Many pension providers offer a choice of other funds to invest in, so it’s worth seeing what other options might be available, so you can decide whether you might prefer to choose a different fund to the default option.

However, remember that past performance shouldn’t be relied on as a guide to the future, so if you’re thinking of picking a fund because it’s previously done well, there are no guarantees it will continue to do so. You should also make sure that any fund chosen is in line with your attitude to risk. If you’re not sure where to invest, you should seek professional pension advice.

We can compare your pension to the best in the market and tell you if it can be improved or not. Click here to get started.

(1) Assumes target is for a 'comfortable' retirement as outlined in our Pension Calculator. All figures quoted are for illustration purposes only and may be higher or lower than illustrated.


(3) YouGov research conducted on behalf of Profile Pensions. Total sample size was 1,320 adults, July 2018


(5) Assumes target is for a 'comfortable' retirement as outlined in our Pension Calculator. All figures quoted are for illustration purposes only and may be higher or lower than illustrated.

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