Top 10 Pension and Retirement Planning Mistakes — and How to Avoid Them
This is the first in a three-part series on common financial planning mistakes. In this installment, we look at retirement—an area where financial decisions are often shaped as much by emotion and uncertainty as by hard numbers.
Here are ten mistakes—or more kindly, oversights—we frequently observe among those planning their own retirement:
1. Ignoring the State Pension
Surprisingly common. Many people forget they’re likely to receive a State Pension.
Under current rules, it kicks in from age 66 (rising to 67 by 2028) and provides just under £12,000 per year for those with full entitlement. That’s per person. For a couple, that’s around £2,000 per month—net of tax—and it’s inflation-proofed via the triple lock.
That’s a solid foundation for most retirement plans.
2. Overlooking Voluntary State Pension Contributions
If you don’t have full entitlement—due to gaps in your National Insurance record—you may be able to plug those gaps by buying back up to six years of contributions.
The breakeven point is roughly three years of State Pension payments. Live longer than that (statistically, you will), and it’s often a no-brainer investment.
3. Giving Up on Pension Contributions
We’re seeing more people—especially younger ones—questioning whether pensions are worth it.
They worry the government will change the rules, citing recent announcements like pensions becoming subject to Inheritance Tax from 2027. There’s a sense that “the government will come for it eventually.”
That might make good headlines—but the bigger picture is more reassuring:
Pensions still offer triple tax benefits: tax relief on the way in, tax-free growth, and 25% tax-free cash on the way out.
The government needs a population that saves for retirement—so incentives are likely to stay, even if the details evolve.
4. Missing Out on Additional DB Pension Purchase
This one’s for our public sector friends—especially NHS workers.
You may already be building up benefits in a Defined Benefit scheme, but few realise you can buy extra pension—and that the value stacks up.
Example: A 30-year-old NHS worker can buy £250 of additional annual pension income (linked to inflation) for around £2,890. That’s an implied return of 8.5%—far higher than what you’d get buying a similar annuity on the open market.
5. Discarding Annuities Outright
Annuities have had a rough PR run. But they’re worth a second look—especially in today’s higher interest rate environment.
They can:
Offer inflation protection
Include death benefits (e.g. ongoing income to a surviving spouse)
Provide a guaranteed income “floor” to cover essential costs
We often use them to underpin core spending, with the rest left invested for flexibility and growth.
6. Assuming Retirement Will Be Easy
It’s not just a financial transition—it’s an emotional one too.
You move from saving and growing wealth, to spending it down. That can be unsettling.
We ask clients to consider:
Have you had enough? (of work)
Do you have enough? (money)
Will you have enough to do….? (purpose, structure, fulfilment)
Answering all three is key to a successful retirement.
7. Ignoring Sequencing Risk
This is the risk of poor market returns—or high inflation—early in retirement, increasing the chance of running out of money.
You can’t eliminate it entirely. But you can manage it:
Some set aside a cash buffer to ride out downturns.
Our preferred approach is guardrails: we set a sustainable initial income, monitor it annually, and adjust if needed. It strikes a balance between “fear of running out” and “regret from missing out.”
For more on this area specifically, have a read here.
8. Retiring Too Early
We’ve seen clients retire too soon—often from a demanding, inflexible job—only to feel a sense of loss or boredom.
Many wish they’d explored “semi-retirement” instead. Something part-time, purpose-driven, and aligned with their interests. Work that gives them structure, identity, and even joy.
9. Retiring Too Late
Equally, some hang on too long—out of fear of not having enough.
Cashflow planning can help here. By modelling different scenarios, we can show whether you really can afford to stop, reduce hours, or change direction.
Sadly, staying too long in a stressful role can come at a cost—to your health and happiness.
10. Neglecting Your Pension Nomination Form
One of the most overlooked areas in retirement planning: the humble “expression of wishes” form.
Many pensions still list ex-partners, or no one at all. That can mean lump sums paid out inefficiently—or not at all. Worse, it can prevent your loved ones from keeping the pension wrapper, which can be much more tax-efficient.
With new rules from April 2027, this becomes even more critical. Thoughtful nominations could allow you to direct pensions to a trust, or to grandchildren, with some valuable planning opportunities around age 75.
Final Thoughts
Retirement isn’t just a financial milestone—it’s a life transition. And like any big change, it’s better approached with a plan. A good one blends hard numbers with softer thinking. It looks not just at how much money you’ll have, but what kind of life you want to live—and how best to fund it.
Happy Thursday!
Kind regards,
George
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Important Disclaimer
This blog is for general information only and is intended for retail clients. It does not constitute financial or tax advice, nor is it an offer to buy or sell any specific investment. Since I don’t know your personal financial situation, you should not rely on this content as tailored advice. While we aim to provide accurate and up-to-date information, we cannot guarantee that all details remain correct over time. We are not responsible for any losses resulting from actions taken based on this blog’s content.
