Pension Planning

You must get control of your pension planning, it is your freedom from dependency. It is great that you can obtain a full State Pension after clocking up 35 years of National Insurance contributions. 

However, the State Pension was never designed to be anything other than a safety net to keep you out of poverty in later life. 


A major part of building financial security for you and your family is to have sufficient income to continue living the life you want once you stop receiving an income from employment or self-employment. 

Research by Equiniti

Research in 2019 by Equiniti showed that 17% of pensioner households survive on state benefits alone, the highest level recorded since 1995-96.  Furthermore, state benefits accounted for 40% of income for the average pensioner and were the main component of retirement income.

Single pensioners were even more dependent on the state, with a quarter having no other income.

What type of pension do you have?

Where your employer provides a defined benefit (i.e. ‘final salary’) pension scheme then you are one of the lucky ones.  In retirement you will receive both a State Pension and an occupational pension that are inflation-linked in some way.  You should be building up stocks and shares ISAs so that in retirement you have the twin benefits of a regular guaranteed inflation-linked income and tax-free funds from which to withdraw further income or capital as and when required.

Most people have to be content with building up defined contribution (i.e. ‘money purchase’ ) pension benefits.  These are simply funds from which you can draw-down a regular amount or lump sums in later life.  Most people seriously underestimate the funds that need to be build up. 

The Lifetime Allowance

In 2006 the Government set a Lifetime Allowance being the maximum amount that you could build up in pensions during your lifetime and still obtain the various tax benefits.  This was originally set at £1.5 million (although for 2022/23 it is currently £1,073,100). 

It was set at a level that was sufficient to purchase an annuity (i.e. a pension income for life) of two thirds of income for someone earning £102,000 pa. 

The sheer size of the lifetime allowance shows how easy it is to seriously underestimate the level of pension contributions you should be making to secure your financial future in later life. 

Below are links to various aspects of pension planning.


This information does not constitute personal advice and should not be treated as a substitute for specific advice based on your circumstances.

Information given relating to tax legislation is based on my understanding of legislation and practice currently in force. Whilst I believe my interpretation of current law and practice to be correct in these areas, I cannot be responsible for the effects of any future legislation or any change in interpretation or treatment. In particular you are warned that levels of tax and tax reliefs are subject to alteration and, in any case, the value of such reliefs and benefits may depend on an individual’s circumstances.

If you are in any doubt as to whether any course of action is suitable for you, then you should discuss the matter with a suitably qualified independent financial adviser or other specialist.