Creating a retirement plan is not a one-time activity; it’s an ongoing process that requires regular reviews and adjustments. Life changes, markets fluctuate and tax laws evolve, making it essential to periodically reassess your retirement strategy. Conducting a comprehensive annual review ensures your retirement plan remains effective, tax-efficient, and aligned with your evolving goals.
Tax treatment depends on your circumstances and is subject to change.
In this article we explore…
…exactly what you should check in your retirement plan each year, from spending habits to investment performance, tax considerations and changes in personal circumstances.
Why regular reviews are crucial
Regular retirement plan reviews ensure:
- Your retirement savings align with your current lifestyle and future expectations
- You adapt proactively to market and economic changes avoiding unpleasant surprises
- Optimal tax efficiency is maintained saving you money and enhancing your income sustainability
- Your plan remains flexible enough to accommodate unexpected changes in health, family circumstances or financial needs
Annual checklist: what to review
Here’s what you should review in your retirement plan each year:
- Spending and budget review
Accurately track your annual expenditure to see how closely it aligns with your planned retirement budget. Consider:
- Essential living costs (housing, utilities, groceries, insurance)
- Discretionary spending (travel, hobbies, entertainment)
- Unexpected or one-off expenses (repairs, medical costs)
Adjust your retirement plan based on actual spending patterns, factoring in inflation and lifestyle changes.
- Income sources evaluation
Review your retirement income sources and ensure they remain stable, predictable and sufficient:
- State Pension entitlement: confirm your projected entitlement using official government resources
- Private pensions (defined benefit and defined contribution schemes): verify expected income, performance and planned withdrawal strategies
- Investment income (ISAs, dividends, rental income): evaluate returns and ensure sustainability
- Investment portfolio performance
Evaluate investment returns, ensuring your portfolio remains aligned with your retirement objectives and risk tolerance:
- Review overall returns compared to your target
- Check individual investment performance
- Rebalance the portfolio to maintain optimal asset allocation
- Assess portfolio diversification and risk levels regularly
- Pension withdrawal strategy
Review your withdrawal approach to ensure your income remains sustainable:
- Check whether your withdrawal rate remains realistic, given your pension pot size and projected lifespan
- Adjust withdrawals based on investment performance and inflation
- Evaluate potential tax implications from withdrawals ensuring tax efficiency
- Tax efficiency and allowances
Tax rules and thresholds often change. Regularly reviewing your tax position is crucial:
- Monitor your pension allowances (the lifetime allowance has been abolished, but the annual allowance is still relevant)
- Maximise ISA allowances (currently £20,000 annually)
- Check your income position relative to tax bands, avoiding higher-rate or unnecessary tax liabilities
- Consider using personal allowance transfers and spousal allowances if available
- Estate planning and beneficiaries
While estate planning doesn’t require frequent changes, annually review key considerations:
- Confirm beneficiaries on pensions and life insurance policies remain correct
- Consider inheritance tax implications and review strategies like gifting, trusts and pension beneficiary drawdowns
- Adjust your plan based on family changes e.g. births, deaths, marriages or divorces
- Healthcare and insurance review
Annual health and insurance assessments help manage potential medical costs and risks:
- Evaluate your health insurance coverage for adequacy, cost-effectiveness and suitability for current health conditions.
- Consider long-term care planning and whether your current savings or insurance adequately cover potential care costs
- Emergency funds and liquidity
Review your cash reserves annually, ensuring sufficient emergency liquidity:
- Maintain a cash buffer for unexpected expenses, reducing the need for premature pension withdrawals during market downturns
- Replenish cash reserves from investment returns or pension withdrawals as necessary
Adjusting your plan based on life changes
Retirement plans should adapt to personal changes:
- Health changes: serious health conditions or new medical diagnoses may alter your income needs and investment risk tolerance
- Family circumstances: marriage, divorce, death of a spouse or support for children and grandchildren can dramatically impact your financial plan
- Relocation or downsizing: adjustments in housing situations can significantly impact your expenditure needs
Regular professional advice can help objectively assess and adjust to these significant changes.
Practical steps for an effective annual review
Conducting an effective review involves structured, practical steps:
- Gather financial documents
Collect recent pension statements, investment account summaries, insurance policies and spending records.
- Update personal financial statements
Clearly summarise your assets, liabilities, income and expenses to facilitate assessment.
- Conduct investment analysis
Evaluate returns against benchmarks, reviewing asset allocation and risk levels.
- Revisit Your retirement goals
Confirm whether your retirement goals remain realistic or if adjustments are necessary based on financial performance or life circumstances.
- Adjust and rebalance
Make necessary adjustments to your investment portfolio, income withdrawal strategy and tax positions.
- Document changes clearly
Document all review findings, adjustments and rationale clearly for reference and future assessments.
Why personalised financial advice matters
A retirement plan review involves multiple complex and interrelated financial decisions. Professional financial advice adds significant value by:
- Providing comprehensive, objective analysis of your financial position
- Offering tailored recommendations based on changing market conditions, personal circumstances and evolving goals
- Ensuring ongoing tax efficiency, investment effectiveness and retirement income sustainability
- Giving reassurance and clarity, allowing confident financial decisions
Final thought
Regularly reviewing your retirement plan isn’t just prudent, it’s essential. Life evolves, markets fluctuate and tax rules change. Your retirement strategy must adapt to remain effective, sustainable and aligned with your goals.
An annual review covering spending, income sources, investment performance, withdrawal strategies, tax efficiency, estate planning, healthcare, and liquidity ensures your retirement remains financially secure, flexible and responsive to changing needs.
Talk to Pension Sense
At Pension Sense, our expert advisers provide personalised financial advice, helping you conduct thorough annual retirement plan reviews. Whether approaching retirement or already retired, we ensure your financial strategy remains optimally positioned, aligned with your objectives, and fully responsive to life’s evolving circumstances.
Discover more on this website about our services and how we do things. If you are ready to start your journey towards a more secure retirement:
