What should you check five years before you retire?

Why does five years matter?

Mr Pickles is 58. He has a comfortable pension pot, a spreadsheet he trusts and a vague intention to stop work at 63. He has not yet written that date down anywhere, which is the first thing to change.

Five years is long enough for small decisions to add up: an extra contribution, a debt cleared, a pension found. It is also long enough to recover from a mistake. One year out, most of those options have gone, and what is left is choosing between what you already have.

The checks below are the ones that reward being early. Mr Pickles works through them in order, one a season, over the first eighteen months.

Do you know your numbers?

The first check is the least glamorous and the most important: what will retirement pay, and what will it cost?

Mr Pickles starts with the State Pension forecast on gov.uk. For 2026/27 the full new State Pension is £241.30 a week, about £12,548 a year. His forecast shows he is on track for the full amount, but only because he checks; a gap in his National Insurance record from a year abroad in his twenties would have cost him. He notes that £12,548 sits just below the £12,570 personal allowance, so almost all of his State Pension is tax-free and anything he draws from a private pension on top is taxable from the first pound.

Then he lists everything else: his workplace pension, two older pots from previous jobs, an ISA, some cash and Mrs Pickles’ own pensions. Income, not just balances.

The other side of the ledger takes longer. He goes through a year of bank statements and sorts the spending into three lines: what he must spend, what he would like to spend, and what he would spend if there is room. The Retirement Living Standards, published by Pensions UK (formerly the Pensions and Lifetime Savings Association), put a moderate lifestyle for a single person at £32,700 a year, or £45,400 for a couple, and the Pickles’ own figure is not far off that. The gap between the State Pension and that number is the whole reason to plan.

Two things make the spreadsheet realistic. The first is inflation: over a twenty-five-year retirement, costs that feel manageable today will not stay still, so the income has to grow too. The second is a trial run. Mr Pickles and his wife try two months living on their projected retirement income while still working. It is not the same as the real thing, but it turns a column of figures into something they have actually felt.

Where are your pensions, and how are they invested?

The second check is finding everything, then looking at what it is doing.

Mr Pickles knows about his current workplace pension. The two older ones are vaguer. The free Pension Tracing Service points him to the scheme that was in place at each old employer; from there it is phone calls, his National Insurance number and rough employment dates to hand. One of the pots turns out to be worth having. The other was transferred years ago and he had forgotten.

Once he can see all three, he reads the fund factsheets for the first time in a decade. Two are in growth funds, which suited him at 40. One is in a lifestyling fund that is already shifting towards bonds and cash as his scheme’s default retirement date approaches. That date is 65, not 63, so the glide path is two years behind his plan. He asks the provider to change it.

He considers combining the three into one. Fewer pots means fewer statements and, possibly, lower charges. But one of the old pensions carries a guaranteed annuity rate, a promise from the 1990s to convert the pot into income at a rate far better than anything on offer today. Transferring would give that up. He leaves that one where it is.

He also finds that a modest extra contribution is worth more than it looks. For a basic-rate taxpayer, every £80 paid in is topped up to £100 by tax relief; a higher-rate taxpayer can claim more back through self-assessment. And he checks whether Mrs Pickles has gaps in her National Insurance record. She does: two years. A voluntary Class 3 contribution of around £900 for a missing year buys roughly £340 a year of extra State Pension for life, which pays for itself in under three years of receiving it. That is one of the few easy decisions in retirement planning.

How will you take the money?

The third check is the one people leave until the day they retire, and it is better made early because it shapes how the pot should be invested in the meantime.

From age 55 (57 from April 2028) you can normally take up to 25% of a pension tax-free, with the rest taxed as income when it is drawn. What you do with the rest comes down to three shapes.

An annuity swaps some or all of the pot for a guaranteed income for life. It cannot run out and it cannot be changed. Anyone with a health condition, or who smokes, should ask about an enhanced annuity, which pays more.

Drawdown keeps the pot invested and lets you take income as you need it. It is flexible and it carries the risk that a poor run of markets, or drawing too fast, leaves too little later.

A blend is common: enough guaranteed income to cover the essentials line in the spreadsheet, drawdown for the rest.

You may have heard of the 4% rule. It comes from research by an American adviser, Bill Bengen, in the 1990s, and it says that drawing around 4% of a pot in the first year gave a strong historical chance of the money lasting. On a £300,000 pot, 4% is £12,000. It is arithmetic, not a plan: it ignores your tax position, other income, health and how the pot is actually invested. Mr Pickles treats it as a way of sensing whether his numbers are in the right postcode, and no more. The real answer comes from cashflow modelling, which maps his actual income, spending and pots year by year and tests them against bad years.

Tax runs through all of this. Drawing a large sum in one tax year can push income into a higher band that would never have applied if it were spread. Taking tax-free cash alongside smaller taxable amounts, and using ISA withdrawals (which are not taxable) to top up, keeps more of the pot out of HMRC’s hands.

What changes for your paperwork in April 2027?

The fourth check is debt and documents, and it has a deadline attached.

Debt first. Mr Pickles has a small mortgage and one credit card that never quite clears. The card costs more than four times what the mortgage does, so it goes first. He then works out whether the mortgage can be gone by 63 and, if not, builds the payments into the retirement budget rather than hoping.

Then the documents. His Will was written when the children were small and no longer says what he means. He updates it. He and Mrs Pickles set up Lasting Powers of Attorney, one for health and one for finances, for each other; these can only be made while you have capacity, so the time to do it is while the question feels unnecessary. And he checks the beneficiary nominations on each pension, which do not follow the Will and have to be updated with each provider directly.

That last check matters more than it used to. From 6 April 2027, most unused pension funds count as part of your estate for inheritance tax. Until now pensions have usually sat outside the estate, which made “spend everything else first and leave the pension untouched” a sensible plan for many families. The logic is changing.

Most estates will still pay no inheritance tax at all, and anything left to a spouse or civil partner stays exempt. But if the family’s total is anywhere near the thresholds, the order in which pots are spent, and who is named on the nominations, deserves a fresh look before 2027 rather than after.

Finally, the folder. Bank accounts, insurance, pension paperwork, passwords: one place, physical or digital, that someone close knows about. It is the cheapest gift you can leave.

What should the next five years look like?

The fifth and sixth checks are the practical ones: a timeline, and the right people around it.

Mr Pickles writes the date down. Then he asks whether he actually means it: stop entirely at 63, or move to three days a week from 61 and stop at 64? More people are choosing the gradual route, and it changes the numbers, so it goes into the model both ways.

He also thinks about the season. Finishing work in May, with light evenings and a garden, is a different first six months from finishing in November. If the choice is his, he takes spring.

Then a rough year-by-year plan:

1. Year 1: increase contributions; fill Mrs Pickles’ NI gaps; update the Will and set up the powers of attorney.
2. Year 2: clear the card; decide whether the mortgage goes; review the fund choices and the lifestyling date.
3. Year 3: run the mock retirement months; first proper cashflow model; check the nominations again after April 2027.
4. Year 4: decide annuity, drawdown or blend; start moving the first two years of income towards cash.
5. Year 5: State Pension forecast rechecked; Pension Wise appointment; hand in the notice.

And the support. Free guidance from Pension Wise or MoneyHelper is available to anyone over 50 and is a good first step. Just as important, Mr and Mrs Pickles talk it through together, because retirement is a household decision and the two of them retiring at different times, with different pensions, is where most plans get complicated.

The last thing on his list is not financial at all. Work has been a large part of who he is. He starts thinking now about what fills that space.