Preparing for your retirement needn’t be an expensive process. If you just want to take an initial look at your options, we list some tools that can provide free or cost-effective guidance.
Even when Natalie McKay was earning little, she always put money into her pension. The 62-year-old now lives in Suffolk as an author – the job title she always wanted – and admitted that these aspirations barred her from “a serious career”.
McKay, who now writes under the name Natalie Meg Evans, worked several roles from a bookkeeper to a freelance copywriter.
But because she always topped up her pension, Mckay had options when she began to think about using it.
Deciding what to do wasn’t easy. There was always the pressure of making the right choice with a significant pot of money.
“If you’re someone who isn’t financially sophisticated, you’ll feel like you’re going to make the wrong call,” she explained.
McKay isn’t alone. According to research from Standard Life, a financial services company, one in five people it surveyed confessed to sleepless nights caused by their retirement planning.
While it may be a stressful experience, there are free tools or cost-effective scheme to help people understand their choices in retirement. These include:
Read more: What does a pension pot worth £37,000, £150,000 and £500,000 give you?
Midlife MOT
The Midlife MOT is a free digital tool aimed at those aged 45 to 65. It aims to improve your overall financial health and plan a more comfortable retirement.
The five-minute questionnaire on MoneyHelper.org.uk asks you about your savings, pensions, insurance, goals and benefit eligibility. Upon completing it, you’ll receive a personalised report that will point you to links and information on focus areas, such as estate planning, tackling debt, or building an emergency fund.
In addition, it is a pension advice service which is free of charge.
Increasing numbers of employers are also offering midlife MOTs to help employees to take stock of their financial wellbeing, so it may be worth seeing what’s available at work.
Read more: A simple guide to pensions
PensionWise
Launched by the government in 2015, PensionWise is a free service which offers impartial guidance to over-50’s approaching retirement.
This comes in the form of a one-hour consultation, which requires customers to know their type of pension, its value, and their entitlement to a state pension ahead of time.
“A Pension Wise appointment will be specifically tailored to the individual caller, which is why MoneyHelper advises that customers bring their relevant documents with them,” said Natalie Brentall, Customer Delivery Manager at the Money and Pensions Service.
Some of the points that could be discussed during this consultation include whether you should delay access to your pension, consider a form of guaranteed income in an annuity, or if you should withdraw from your pot in one go.
The session with one of PensionWise’s members takes place via the phone, although there are limited spaces for in person appointments at selected Citizen’s Advice offices.
It’s a service which has grown in popularity. According to Brentall, nearly 14,000 people used the service in the first year of its launch. As of the last full year this has grown to over 100,000 appointments.
“Free guidance was better than a paid consultation”
Natalie McKay, a 62-year-old author from Suffolk, made use of the PensionWise service in 2022 after feeling the weight of deciding what to do with her £100,000 pension pot. She describes her experience as “enormously helpful” and better than a paid consultation she previously sought. “The consultation lasted well over the allotted hour, I had time to repeat some questions and make notes, and it gave me the confidence to eventually opt for an annuity. I got an annuity rate of 6 per cent for my pot and now receive £518 a month.”
The £1,500 tax break for advice
Rebecca O’Connor, Director of Public Affairs at PensionBee, described the Pension Advice Allowance as “a little-known, under-used perk”.
This rule allows members of defined pension schemes to withdraw £500 from their pot tax-free for financial advice. You can make this withdrawal once every tax-year for a maximum of three withdrawals.
O’Connor said a basic taxpayer would effectively save £750 by using this scheme rather than paying for advice from their taxable income.
“That’s because when they paid £1,500 into their pension originally. This would have cost £750, with a further £562.50 coming from their employer and £187.50 from basic rate relief,” she explained.
However, O’Connor warned that not all pension providers offer this service.
Read more: How much do I need to retire?
A one-hour free consultation with Kellands Chartered Financial Planners
Kellands Chartered Financial Planners is a financial advice firm which has partnered with the Times Money Mentor.
One of its specialities is pension advice, and it’s currently offering our readers their first one-hour consultation for free.
This has a value of approximately £250, and during this session one of its advisers will go through what options you could utilise in retirement.
Click on this link to book your first consultation.
Read more: How much does financial advice cost – and is it worth it?
Important information
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