5 common retirement planning mistakes and how to avoid them
Retirement planning is one of those things most of us know we should be doing, but somehow keep putting off. Life gets busy, other financial priorities take over, and before you know it, the years have passed.
At Fairview Financial Management, we work with people across Essex at all stages of their financial journey. And the same retirement mistakes come up time and time again. Here are the five most common ones and what you can actually do about them.
1. Starting too late
This is the big one. And honestly, it’s understandable. When you’re in your 20s or 30s, retirement feels like a lifetime away. There’s a mortgage to save for, a family to think about, bills to pay. The pension can wait.
But here’s the thing: time is the most valuable asset you have when it comes to retirement saving. Thanks to compound growth, money invested early has far longer to grow. Someone who starts putting £200 a month into their pension at 25 will typically end up with a much larger pot than someone who starts at 40 and contributes twice as much.
So when should you start?
Now. Genuinely, the best time is now, whatever age you’re reading this. The UK’s auto-enrolment scheme means most employees are already saving something through their workplace pension, which is a great start. But the minimum contributions under auto-enrolment are rarely enough on their own. It’s worth checking what you’re currently putting in and whether it’s realistically going to get you to where you want to be.
2. Underestimating what you’ll actually need
A lot of people assume their spending will drop dramatically once they stop working. Sometimes it does, but often especially in the early, more active years of retirement it doesn’t.
According to the Pensions and Lifetime Savings Association Annual Retirement Living Standards, a single person needs approximately £43,100 a year for a comfortable retirement in the UK. A moderate standard of living requires around £31,300. These are not lavish amounts and simply cover holidays, everyday leisure, and the occasional home repair.
When you factor in a retirement that could easily last 25 to 30 years, the total amount you’ll need can feel quite sobering. That’s not meant to alarm you, it’s meant to give you a realistic target to work towards.
Don’t forget your State Pension either. For 2026/27, the full new State Pension is £241.30 per week, but you’ll need 35 qualifying National Insurance years to receive it in full. You can check your forecast on the Government Gateway website, and it’s well worth doing.
3. Overlooking inflation
Inflation doesn’t grab headlines in the same way that stock market crashes do, but over a 20 or 30-year retirement, it can quietly do just as much damage to your finances.
If your savings are sitting in low-interest cash accounts, there’s a real chance inflation is eroding your purchasing power year on year. A pound today simply won’t buy the same things in 2045.
This is why your investment strategy matters. A pension portfolio that’s appropriately diversified and suited to your risk tolerance and time horizon is far better placed to grow in real terms. In the years approaching retirement, your adviser will typically help you adjust and refine your investment portfolio to ringfence pots of money within it that will be more stable, in preparation for income withdrawals. But in the years before that, standing still isn’t the safe option many people think it is.
4. Not making the most of tax relief
Pension contributions come with one of the most generous tax breaks available in the UK, yet plenty of people either don’t understand it or simply aren’t claiming what they’re owed.
Here’s how it works. When you pay into a pension, the government tops it up with tax relief at your marginal rate:
- Basic rate taxpayers get 20% relief
- Higher rate taxpayers can claim 40%
- Additional rate taxpayers can claim 45%
For higher and additional rate taxpayers, this extra relief usually has to be claimed via Self Assessment and many people miss out on it entirely without realising.
It’s also worth checking whether your employer will match any additional contributions you make. If they will and you’re not taking them up on it, you’re essentially leaving free money on the table.
The annual allowance for pension contributions in 2026/27 is £60,000 (or 100% of your earnings, whichever is lower). If you’ve had a particularly good income year, it’s worth having a conversation with an IFA about your options.
5. Setting it and forgetting it
A pension isn’t a set-and-forget product, but a lot of people treat it like one. They set it up, pick a fund (or worse… go into the default fund!), and don’t look at it again for years.
The problem is that life changes significantly over time. A new job, marriage, divorce, children or an inheritance can all shift what you need from your retirement plan. Your fund may also have drifted away from your goals or preferred level of risk.
That’s why a regular annual review with a qualified independent financial adviser is important to keep things on track. It’s also a good opportunity to update your nominated beneficiaries; something people frequently forget to do after a change in personal circumstances.
If you’ve had several jobs over the years, you may also have old workplace pensions sitting dormant. The Government’s free Pension Tracing Service can help you track them down. Consolidating them might make your retirement savings easier to manage and monitor.
Can you retire early?
It’s something many people ask, and the answer is yes, but it depends on planning ahead. From 2028, the earliest you can access a private pension will be 57. Retiring early means your money has to last longer, and you will need a plan to cover the period before your State Pension at 66 (and shortly rising to 67).
If you start early and stay consistent, early retirement becomes much more realistic.
We’re here to help
If any of this has made you wonder whether your retirement planning is where it should be, we’d love to have a chat. As independent financial advisers based in Essex, Fairview Financial Management offers whole-of-market advice built around your individual circumstances, not a one-size-fits-all solution.