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Planning for retirement: the last few years.
What to check, when to decide, and how to take your pension, with tools to run your own numbers on 2026/27 figures
How ready are you to retire?
Five quick questions, rough answers are fine. See your stage and what matters most now.
5 quick questions
Your result
Answer the five questions to see your stage and what matters most now.
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What matters most now
Information, not personal advice. Based on your answers and the rules in England for 2026/27.
In this guide · 5 stages · 1 check · 5 calculators · 14 guides · 1 video
A step-by-step guide to the years before you retire.
If you’re approaching retirement, you may have several pensions, savings and important decisions ahead. This guide helps you understand what to consider, when to act and how to prepare for retirement with confidence.
Start with the five-question check above. It tells you your stage, from more than three years out to already retired. Go to that stage for the decisions that matter now, with calculators, guides and a way to talk to an adviser.
- On track?
- Too many pots
- Tax-free cash
- Drawdown or annuity
- Tax in retirement
- Passing it on
Written for people within ten years of retiring. Figures checked against gov.uk on 21 September 2026. Information, not personal advice.
Key figures, 2026/27
The numbers that govern every option.
Sources: gov.uk pension tax rules and State Pension rates for 2026/27, checked 21 September 2026. State Pension age is rising from 66 to 67 between 2026 and 2028. Some people hold protections that allow more tax-free cash.
Compare
Six ways to take your pension, side by side.
These apply to defined contribution pensions, which means most personal and workplace pots. Final salary schemes work differently and are not covered here.
Leave it invested
Take nothing yet. The pot stays invested and you decide later.
How it is taxed, and what to check
How it is taxedNo tax until you take money out.
What to checkCharges, how the pot is invested, and who inherits it. See lifestyling.
Guaranteed income (an annuity)
Exchange some or all of the pot for an income for life, or for a fixed term.
How it is taxed, and what to check
How it is taxedUp to 25% tax-free first. The income is taxed like earnings.
What to checkRates vary between providers, and a lifetime annuity usually cannot be changed once bought.
Flexible income (drawdown)
Take your tax-free cash and leave the rest invested, drawing income as you need it.
How it is taxed, and what to check
How it is taxedWithdrawals beyond the tax-free part are taxed as income.
What to checkHow long the money lasts. Try the drawdown calculator.
Lump sums from the pot
Take money in slices, leaving the rest untouched. Providers call this UFPLS.
How it is taxed, and what to check
How it is taxedEach slice is 25% tax-free and 75% taxable.
What to checkThe first payment is often taxed on an emergency code. Overpaid tax can be reclaimed from HMRC.
Take it all at once
Cash in the whole pot.
How it is taxed, and what to check
How it is taxed25% tax-free. The rest is added to your income for that tax year.
What to checkA large sum can push you into a higher band. Check the 2026/27 tax bands.
Mix your options
Use different options for different pots, or at different times.
How it is taxed, and what to check
How it is taxedEach part is taxed under its own rules.
What to checkTaking taxable income flexibly limits future contributions to £10,000 a year.
Stage 1 · More than three years out
Are you on track?
The number most people want is how much is enough. It depends on what you will spend, when you stop, and what the State Pension adds from 67. These pages work that through at different ages and pot sizes.
Start here · CalculatorPension pot calculatorYour pot at the age you take it, how it builds up, and the tax-free cash it could give you.Open the calculator
Video · 2 minHow we plan retirement with youJames Mackay explains how we help people approaching retirement. He covers working out how much is enough, and turning pensions, savings and investments into an income that lasts.
Read next
Guide · 6 min readHow much do you need to retire?The starting point: spending first, then the pot that supports it.
Guide · 11 min readHow much do you need to retire at 60?Worked scenarios from a £250,000 pot to £1 million.
Guide · 11 min readRetiring at 55What it takes to stop at 55, and the years your pot must carry alone.
Next · Stage 2Within three years
Want to talk this stage through? Advice in the last years before you retire.
Stage 2 · Within three years
Getting your position in one place.
Most people reach this point with several pensions, some savings and no single picture. Decisions made here are easier to change than the ones that follow. This is the stage to see everything together.
Start here · CalculatorWhen can I retire calculatorThe earliest age your pensions and savings could pay the income you want, and how long it lasts.Open the calculator
Read next
Guide · 8 min readToo many pension pots?When combining pots helps, when it costs you, and the ones to leave alone.
The firm's view · 11 min readIs your pension being de-risked too soon?Many default funds start moving out of shares ten years before retirement. What that can cost.
Want to talk this stage through? Advice in the last years before you retire.
Stage 3 · This year
How you take the money.
This is where the six options above become real decisions. How you take money sets your tax bill, limits what you can pay in afterwards, and affects what is left to pass on.
Start here · CalculatorPension drawdown calculatorHow long your pot lasts at the income you want, year by year.Open the calculator
Read next
Guide · 28 min readTax-free cash before the BudgetShould you take it before 28 October 2026? What it costs to take early, and what a cut would cost.
Guide · 5 min readCrystallised and uncrystallised pensionsWhat happens to a pot when you start taking benefits, in plain terms.
Guide · 8 min readTax on your retirement incomeHow pension withdrawals are taxed, and what affects the size of the bill.
Want to talk this stage through? Advice in the last years before you retire.
Stage 4 · In retirement
Tax, and making it last.
Once income starts, the questions become practical. How much tax falls due, which allowances are still open, and whether the plan holds if markets fall early.
Start here · CalculatorUK tax brackets and allowancesEvery 2026/27 rate, band and allowance on one page, with your own tax worked out.Open the calculator
Read next
Guide · 11 min readHow much can a pensioner earn before paying tax?The State Pension now uses almost all of your personal allowance. What is left.
The firm's view · 9 min readWhat a planner does after you retireThe ongoing work: income, tax, investments and keeping the plan honest.
Guide · 11 min readRetiring on £1 million or moreThe allowances and limits that only start to matter at this size.
Want to talk this stage through? Advice in the last years before you retire.
Stage 5 · Passing it on
Your pension and inheritance tax.
From 6 April 2027, most unused pension funds count towards your estate for inheritance tax. For some families that changes the old approach of spending everything else first.
Start here · CalculatorInheritance tax calculatorYour estate before and after the April 2027 change, side by side.Open the calculator
Read next
Guide · 14 min readPensions and inheritance tax from April 2027What changes, who is affected, and what stays outside the estate.
Guide · 8 min readWhat happens to your pension when you die?Before and after 75, nominations, and how beneficiaries are taxed.
Guide · 15 min readTrusts and inheritance taxWhat a trust can and cannot do, and when one is worth the complexity.
Next · When you want a plan of your ownAdvice in the last years before you retire
Frazer James was founded on a simple belief: retirement should be approached with clarity, not guesswork. Our mission is to give you the confidence and structure to make the most of what you’ve built, helping you retire securely, live comfortably, and protect your legacy.
Questions people ask when planning for retirement.
What are my pension options at retirement?
With a defined contribution pension you have six broad choices from age 55, rising to 57 from 6 April 2028. You can leave the pot invested, buy a guaranteed income, move into flexible drawdown, take lump sums, cash it in, or combine these. Defined benefit schemes work differently and usually pay a set income for life.
Which retirement option is best?
There is no single best option. The right mix depends on your other income, your health, your tax position, who depends on you, and how much certainty you want. Some people use a guaranteed income for essentials and keep a flexible pot for everything else. This page is information, not a personal recommendation.
Is it better to take a lump sum or a regular income?
It depends on what the money is for and the tax it triggers. Up to 25% of a pension is usually tax-free, capped at £268,275 across all your pensions. Anything above that is taxed as income in the year you take it. A large sum in one tax year can push you into a higher band.
What happens to my pension contributions once I start taking money?
Taking taxable income flexibly triggers the money purchase annual allowance. From then on, tax-relieved contributions to defined contribution pensions are limited to £10,000 a year. Taking only your tax-free cash, or buying a lifetime annuity, does not normally trigger it.
What are the most common retirement planning mistakes?
Four are widely documented. People take more than they need in one tax year and pay higher rate tax on it. They trigger the £10,000 contribution limit while still paying in. They leave old pots in default funds that no longer match their plans. They forget to update who inherits the pension.
How does the April 2027 inheritance tax change affect my pension?
From 6 April 2027, most unused pension funds and death benefits count towards your estate for inheritance tax. That challenges the long-standing approach of spending other assets first and leaving the pension untouched. Death in service benefits and pensions passing to a spouse or civil partner remain exempt.
Can I get free guidance on my pension options?
Yes. Pension Wise, a government-backed service from MoneyHelper, offers free and impartial guidance if you are 50 or over with a defined contribution pension. Guidance explains your options. Regulated advice, which a financial planner provides, recommends a course of action for your circumstances.
Before you go further
Who this guide is not for.
We would rather say so now than waste your time.
- You want a product recommendation without a plan behind it.
- You are looking for guaranteed or market-beating returns.Nobody can honestly offer either.
- Your pension is a defined benefit scheme and you want to transfer out.That is specialist work we do not cover here.
Important information. This page gives information, not personal advice. Tax rules can change, and how they affect you depends on your circumstances.
The value of investments can fall as well as rise, and you may get back less than you invest. A pension is a long-term investment.
Free, impartial guidance is available from Pension Wise, a service from MoneyHelper, if you are 50 or over. If you want a recommendation for your own position, that is what our retirement planning service is for.
Reviewed by
BSc, MLIBF, PETR, Chartered ALIBF · Co-Founder and Chartered Associate
Chris has spent over a decade in financial planning and specialises in research and technical analysis. He checks every figure and calculation on this page before it is published.
WITHIN A FEW YEARS OF RETIRING?
The first conversation is free and there is no obligation. Bring the figures the calculators gave you and we will talk through what they mean for your position.