How to maximise your pension income before you retire

Whether you are already retired or starting to plan for retirement, making your money work for you while you relax is important.

It’s worth looking closely at your financial options as you near the age when you plan to stop work, because having the cash available for a comfortable retirement is key.

Fortunately there are plenty of things you can do to ensure that you maximise your pension income before you retire, as well as perks you can get that help make life a little cheaper after 50.

Maximise your pension

The new rules surrounding pensions, which allow you to take your retirement savings as cash rather than an annuity, give you more control than ever over your spending.

In the years before you retire, it’s worth getting pension forecasts and updates to check what your annual income could be when you stop work.

AgeUK has a useful calculator that can help you work out how much you need to retire on. If the figure you have is less than you hoped for, consider working part-time for longer – giving you time to relax and enjoy your hobbies. You could also consider whether you could put more into your pension now, before you stop work.

Set a retirement budget

Whether you are still working full time, working flexibly or retired, budgeting makes the money last.

You can work out your day-to-day spending by making a careful budget. Going through your bank statements and receipts for the past three months should give you an idea. Be aware that some months may be “spend heavy” – for example Christmas – so ensure that you have taken this into account.

Life after retirement in numbers

Embrace the perks

You may be entitled to perks such as free transport for senior citizens and the Winter Fuel Allowance, and your mortgage or other loans may be coming to an end. You are also unlikely to be paying for commuting or other costs such as work lunches.

However, you might find your spend on heating and lighting increases, while you may also spend more on leisure activities. Nearly a third of women and a quarter of men take up a new hobby after they retire, while 60pc travel, so consider the costs of these.¹ An Adult Education Centre run by your local council may offer subsidised classes, and the University of the Third Age (U3A) has courses for a minimal rate.

Providing for your family

You may want to pass on some of your savings to children or grandchildren. If you have Isas, it may be sensible to spend these first and leave your pension invested, because your pension is outside your estate for inheritance tax purposes and passing it on can be very tax-efficient.

Taking out life cover, which will pay out to your spouse or dependants when you die, can help ensure funeral costs are taken care of. As Mark Jones, protection director at SunLife, says: “Money can never replace you but it can remove financial trauma when your family try to come to terms with your death and their changed lives in the years afterwards. It provides the peace of mind that, should anything happen to you, your family don’t also lose their home and lifestyle.”

Welcome to life after 50

Everyone’s saying that 50 is the new 30 – with more free time and more disposable income, you can go on that round-the-world cruise you’ve always dreamed of or even fulfil your lifelong ambition of learning to become the next David Bailey.

SunLife understands that life begins at 50, which is why they’ve teamed up with the Telegraph to provide a wealth of inspirational case studies, money management tips and useful checklists to help you make the most of your golden years.