An Individual Savings Account (ISA) is a tax-efficient way for UK residents to save or invest. You don’t pay tax on any interest, dividends, or capital gains earned within an ISA.

Each tax year (from 6 April to 5 April), you can pay in up to £20,000 across your ISAs. You can split this between different types, but only contribute to one of each type per year. All growth or returns within the ISA are tax-free.

A Lifetime ISA (LISA) is for people aged 18 to 39 saving for their first home or retirement. You can contribute up to £4,000 per year, and the government adds a 25% bonus—up to £1,000 annually. Withdrawals are tax-free when used for your first home or after age 60; otherwise, a penalty applies.

A Cash ISA is a good option if you want low-risk savings with tax-free interest. It's suitable for short- or medium-term goals like an emergency fund, and offers instant access or fixed-rate deals depending on your needs.

ISAs can support retirement planning by offering tax-free withdrawals and no restrictions on when you can access the money. They’re useful for managing income, topping up your pension, or reducing tax bills during retirement.

For the 2025/26 tax year, the total ISA allowance is £20,000, with up to £4,000 of that eligible for a Lifetime ISA. You can only pay into one of each ISA type per year, and unused allowance does not roll over to future years.

The Retirement Living Standards website offers a practical framework to help you estimate the income needed for your desired lifestyle in retirement. The standards show you what life in retirement looks like at three different levels:

• Minimum
• Moderate
• Comfortable

and what a range of common goods and services would cost for each level.

Research done by the Pensions & Lifetime Savings Association (PLSA) has quantified the retirement income required each year for each of the three standards of living.

Category	Minimum	Moderate	Comfortable
Single Person	£14,400	£31,300	£43,100
Couple	£22,400	£43,100	£59,000

These values have been built up from quantifying average annual expenditure for the following categories:

• Housing
• Food
• Transport
• Holidays & Leisure
• Clothing & Personal
• Helping Others

Category	Minimum	Moderate	Comfortable
Housing	DIY £100 a year to maintain condition of your property.	Some help with maintenance and decorating each year.	Replace kitchen and bathroom every 10/15 years.
Food	£50/wk groceries, £25/month eating out, £15/fortnight takeaways.	£55/wk groceries, £30/wk eating out, £10/wk takeaways, £100/month to treat others.	£70/wk groceries, £40/wk eating out, £20/wk takeaways, £100/month to treat others.
Transport	No car, £10/wk taxis, £100/yr rail fares.	3-year-old car replaced every 7 years, £20/month taxis, £100/yr rail fares.	3-year-old car replaced every 5 years, £20/month taxis, £200/yr rail fares.
Holidays & Leisure	1 week UK holiday. Basic TV, broadband + 1 streaming service.	2-week Med holiday (3*), 1 UK break. Basic TV, broadband + 2 streaming services.	2-week Med holiday (4*), 3 UK breaks. Extensive broadband/TV subscription.
Clothing & Personal	Up to £630/yr for clothing & footwear.	Up to £1,500/yr for clothing & footwear.	Up to £1,500/yr for clothing & footwear.
Helping Others	£20 per gift, £50/yr charity donation.	£30 per gift, £200/yr charity, £1,000 family support.	£50 per gift, £25/month charity, £1,000 family support.

The retirement living standards are a useful guide to typical spending in retirement, but you should be aware that certain items are not included in the figures:

• Housing: The figures assume that retirees own their home outright and are not making rent or mortgage payments. Anyone who expects to pay for housing in retirement will need to factor those additional costs in separately.
• Care costs: No allowance is made for personal or residential care costs. These can be substantial in later life, so separate planning is needed if care might be required.
• Tax: The expenditure amounts are presented on an after tax basis. This means they reflect what retirees might spend, not what their gross income from their pension needs to be.

While the retirement living standards offer a helpful benchmark, there are important limitations to keep in mind:

• They might not align with individual spending habits: The standards assume certain levels of spending that may not suit everyone. For example, someone who has always lived frugally may find the suggested figures unnecessarily high. In general, people’s spending habits tend to remain consistent throughout their lives.
• They are averages, not individuals: The figures represent averages across the population, but an average is just a statistical measure—not a person. Relying on averages for retirement planning can be misleading, as they may not reflect the diverse needs and personal circumstances of real individuals.
• They are just a starting point for a conversation: The standards are not definitive or prescriptive. Instead, they should be seen as a helpful "stake in the ground" to begin thinking about retirement income. They are best used as a tool to guide discussions, with proper financial planning tailored to each individual’s goals and situation.

Income tax is a tax on earnings from salary, self-employment, pensions, and other income. There are several bands that are taxed at different rates. These are the bands for the 2025/26 tax year in England, Wales, and Northern Ireland:

• Personal Allowance (0%) — no tax on income up to £12,570
• Basic rate (20%) — for income from £12,571 to £50,270
• Higher rate (40%) — for income from £50,271 to £125,140
• Additional rate (45%) — for income over £125,140

If you earn over £100,000, your Personal Allowance is gradually reduced — for every £2 of income above £100,000, you lose £1 of allowance — meaning it is fully removed at £125,140.

Scotland has different income tax bands and rates from the rest of the UK, set by the Scottish Parliament. These are the rates for the 2025/26 tax year:

• Personal Allowance (0%) — no tax on income up to £12,570
• Starter rate (19%) — for income from £12,571 to £15,397
• Basic rate (20%) — for income from £15,398 to £27,491
• Intermediate rate (21%) — for income from £27,492 to £43,662
• Higher rate (42%) — for income from £43,663 to £75,000
• Advanced rate (45%) — for income from £75,001 to £125,140
• Top rate (48%) — for income over £125,140

The gradual reduction of the Personal Allowance above £100,000 still applies in Scotland, just as it does in the rest of the UK.

National Insurance is a tax paid by employees, employers and the self-employed. It helps fund state benefits such as the State Pension, statutory sick pay, and maternity leave. The amounts to be paid are calculated as follows:

• Employees — 8% on earnings between £12,570 and £50,270, and 2% on earnings above £50,270.
• Self‑Employed — 6% on profits between £12,570 and £50,270, and 2% on profits above £50,270.
• Employers — 15% on employee earnings above £5,000 per year.

Pension tax relief is a government incentive to encourage people to save for retirement. It means some of the money that would have gone to the government as tax is instead added to your pension pot.

• Basic rate relief (20%) — for every £80 you contribute, the government adds £20, making it £100 in your pension.
• Higher rate relief (40%) — for every £60 you contribute, the government adds £40, making it £100 in your pension. This is why pensions are such a good deal if you are a higher rate tax payer, particularly if you are likely to be a basic rate taxpayer in retirement.
• Annual allowance — you can contribute up to £60,000 a year (or 100% of your earnings if lower) and still get tax relief. This allowance is reduced for earners above £260,000.

How you claim depends on how much you earn and the type of pension scheme you have. It may happen automatically.

• Workplace Pensions — Contributions are taken from your pay before tax is applied. In this case, full tax relief is automatic, even for higher earners, and you don’t need to claim anything.
• Basic rate taxpayers (20%) — For personal pensions, the provider will automatically claim the 20% tax relief from HMRC and add it to your pension. You don’t need to do anything.
• Higher rate taxpayers (40%) — You can claim the extra tax relief above the basic rate through your Self Assessment Tax Return.

Yes, in most cases you can take part of your pension tax free when you start to access it. This is known as the tax-free lump sum or pension commencement lump sum (PCLS).

• Up to 25% tax free — You can usually take up to 25% of your pension pot tax free. The remaining 75% is taxed as income when you withdraw it.
• Flexible access — You don’t have to take it all at once. Some people take smaller amounts over time, with 25% of each withdrawal being tax free.
• Defined benefit pensions — If you have a final salary or career average pension, the tax-free lump sum is usually calculated differently and may reduce your annual income from the scheme.
• Lifetime allowance scrapped — The lifetime allowance was abolished in April 2024. Instead, there’s now a limit of £268,275 on how much you can take tax free across all your pensions (unless you have protected rights to a higher amount).

Your State Pension is treated as taxable income, but it's paid to you without any tax deducted at source. Whether you pay tax on it depends on your total income from all sources.

• Tax-free allowance — Most people can earn up to £12,570 a year (the Personal Allowance) before paying income tax. Your State Pension counts towards this total.
• If State Pension is your only income — You probably won’t pay any tax, as it’s usually below the Personal Allowance threshold.
• If you have other income — For example, from a private pension, salary, or savings, your State Pension may push your total income above the tax-free limit. HMRC will adjust your tax code to collect tax through one of your other income sources.

Carry forward is a pension rule that allows you to make contributions above the standard annual allowance by using any unused allowance from the previous three tax years — provided you were a member of a UK-registered pension scheme in those years.

• Annual allowance — The current annual allowance is £60,000 (for 2025/26). You can use carry forward to exceed this limit and still receive tax relief. The annual allowance is reduced for high earners. For every £2 of adjusted income above £260,000, the allowance reduces by £1, down to a minimum of £10,000.
• Using unused allowance — If you didn’t use your full annual allowance in the previous three tax years, you can add the leftover amount to this year’s allowance.
• Eligibility — You must have sufficient earnings to cover the total contribution, and you cannot use carry forward if have already started taking income from the taxable part of your pension fund.

Lump sum recycling refers to a situation where someone takes a tax-free lump sum from their pension — known as the Pension Commencement Lump Sum (PCLS) — and then reinvests some or all of it back into their pension to gain additional tax relief. HMRC has strict rules to prevent this from being used to gain unfair tax advantages.

• What counts as recycling? — If you take a PCLS and then significantly increase your pension contributions, HMRC may view this as recycling, especially if it was planned in advance.
• 30% Threshold — If your total pension contributions increase by more than 30% of what you were previously contributing, and this is linked to having taken a lump sum, it may trigger anti-recycling rules.
• £7,500 Threshold — The recycling rules do not apply if the PCLS payment, combined with any other PCLS payments in the previous 12 months, does not exceed £7,500
• Consequences — If HMRC deems that you have recycled a PCLS, the lump sum could be taxed in full, removing the usual 25% tax-free benefit.
• Planning matters — The recycling rules only apply if there was an intention to recycle at the time the lump sum was taken. Genuine changes in financial circumstances may not be affected.

Capital Gains Tax (CGT) is a tax on the profit you make when you sell or dispose of something (like shares, property, or other investments) that has increased in value. It’s the gain you make that’s taxed, not the amount you receive.

• CGT and pensions — Capital Gains Tax does not apply to money held and invested within a registered pension (like a personal pension or workplace pension). This means your pension investments can grow tax-free.
• Investment growth inside pensions — Any increase in the value of assets within your pension — such as shares, funds, or bonds — is not subject to CGT. This is one of the key tax advantages of saving into a pension.
• Outside of pensions — If you invest personally (e.g. in a general investment account), and sell assets at a profit, you may have to pay CGT if your total gains exceed the annual exempt amount (£3,000 for 2025/26).

For defined contribution pensions, your main choices are:

• Take a Tax-Free Lump Sum - you can draw up to 25% of your pension pot at retirement.
• Buy an Annuity - convert the remainder into a guaranteed income for life by purchasing an annuity.
• Drawdown - keep your pot invested and withdraw income as needed.
• Take a number of tax free lump sums using the Uncrystallised Funds Pension Lump Sum (UFPLS) arrangement, 25% of every future withdrawal is tax-free.
• Combine these options to create a retirement income strategy that suits your lifestyle and goals.

For defined benefit pensions, you only really have two choices:

• Take a Tax-Free Lump Sum - most schemes allow you to take a tax-free lump sum. As there is no individual fund for a defined benefit pension, the amount will be related to the annual pension you are entitled to. This makes sense because the tax-free benefit will be lost if not taken.
• Delay Retirement - this should result in a higher pension being paid at a later date.

Pension Wise is a free, government-backed guidance service that helps you understand your pension options and make informed choices. It can be accessed here here.

An annuity is a insurance product you can buy with some or all of your pension pot. It gives you a guaranteed income for life (or for a fixed period), no matter how long you live. There are several options you can choose when setting one up, depending on your needs and preferences:

• Lifetime annuity — Pays you a regular income for the rest of your life. This is the most common type and is useful if you want certainty and simplicity.
• Fixed-term annuity — Pays you an income for a set number of years. At the end of the term, you may get a lump sum back (called a “maturity value”) or choose what to do next.
• Single or joint annuity — A single annuity pays income only to you. A joint annuity continues to pay income to your spouse or partner after you die, usually at a reduced rate (e.g. 50%).
• Level or increasing income — A level annuity pays the same amount every year. An increasing annuity rises each year—either by a fixed percentage (e.g. 3%) or in line with inflation (CPI or RPI). Increasing annuities start lower but help protect your income from rising living costs.
• Guarantee period — You can choose a guarantee (e.g. 5 or 10 years), which means the income will be paid for that time even if you die early. If you die within the guarantee period, the remaining payments go to your estate or chosen beneficiary.

Note: Once you buy an annuity, the decision is usually permanent. It’s important to shop around for the best rates and options using the open market. Your health and lifestyle can also affect the income you’re offered—some people qualify for a higher ‘enhanced annuity’ if they have certain conditions.

• Guaranteed income for life — An annuity provides a steady, predictable income for the rest of your life, removing the worry of outliving your savings.
• Peace of mind — Knowing your basic expenses are covered by a reliable income can reduce stress and make budgeting much easier in retirement.
• Optional features — Some annuities offer inflation protection or payments to a partner after your death, although these may reduce your starting income.
• No investment risk — Once you buy an annuity, your income is secure and unaffected by market ups and downs.

• No flexibility — Once you buy an annuity, you usually can’t change or cancel it, even if your circumstances or income needs change later on.
• Inflation risk — If you don’t choose an annuity that increases with inflation, the real value of your income may fall over time as prices rise.
• Low rates — Annuity rates depend on interest rates and life expectancy. If you buy when rates are low, your income could be less than expected.
• No inheritance — Unless you choose specific features, such as a spouse’s pension or a guaranteed period, payments usually stop when you die and nothing is left to pass on.

Pension drawdown (also known as flexi-access drawdown) is a way of taking money from your pension pot while keeping the rest invested. Instead of buying an annuity, you leave your pension invested and withdraw income as and when you need it.

• Take tax-free cash — You can usually take up to 25% of your pension pot tax-free, either all at once or in smaller chunks as you go.
• Flexible withdrawals — You choose how much income to take and when. You can vary the amount each year or stop and start as needed. This gives you more control compared to a fixed annuity.
• Keep your money invested — The part of your pension that you don’t withdraw stays invested, which means it can continue to grow tax-free.
• Be aware of investment risk — Because your pension remains invested, its value can go down as well as up. You take on the risk that your money might not last as long as you need it to, especially if markets fall early in retirement.
• Ongoing decisions required — You’ll need to make regular choices about how your pension is invested and how much to withdraw. Luckily you are in the right place - Calculate My Pension can provide guidance in this matter!
• Leave money to loved ones — Any remaining pension pot when you die can be passed on, but will be subject to inheritance tax from April 2027.

• Flexible access to your money — Pension drawdown lets you choose how much income to take and when, allowing you to tailor withdrawals to suit your lifestyle and spending needs.
• Potential for growth — Because your pension remains invested, there’s a chance your pot could continue to grow, especially if markets perform well.
• Tax-efficient planning — You can manage how and when you take income to minimise your tax bill, for example by staying within your personal allowance or avoiding higher tax bands.
• Leave money to loved ones — Any unspent funds can be passed on to beneficiaries, making drawdown a good option if leaving an inheritance is important to you.
• More responsibility — You’ll need to keep track of how much you’re withdrawing and ensure your money lasts. If markets fall or withdrawals are too high, your pot could run out.

• Investment risk — Your pension pot stays invested, so it can fall as well as rise. Poor market performance could reduce your retirement savings.
• Longevity risk — If you live longer than expected and withdraw too much too soon, you could run out of money later in retirement.
• Complexity — Managing drawdown involves ongoing decisions about investments and withdrawals. It may require regular reviews or financial advice.
• Tax risk — Large or irregular withdrawals could push you into a higher tax bracket, resulting in a bigger tax bill than expected.
• Emotional impact — Seeing the value of your pot fall during a downturn can be stressful, especially if you're relying on it for income.

• To spend it: You might want to use your tax-free cash to enjoy life—perhaps for a once-in-a-lifetime holiday, a new car, or simply to make the most of your first year in retirement while you're still fit and active.


• To pay off debts: Using tax-free cash to clear debts—especially a mortgage—can offer a guaranteed return equivalent to the interest saved.


• Ongoing tax efficiency: Taking tax-free cash can give you greater income flexibility and reduce future tax. Moving the tax-free cash into an ISA and using the ISA for flexible additional income helps you to avoid moving into higher rate tax bands in the future.


• To contribute to your spouse’s pension: Taking tax-free cash and contributing it into your spouse’s pension (within their annual allowance) can be very tax-efficient—especially if they’re a higher or additional rate taxpayer.


• To hedge against future legislative changes: Pension rules can change. Taking some tax-free cash now and moving it into an ISA or other wrapper may help protect against unfavourable changes. However, this strategy is speculative and should be balanced against the long-term tax benefits of leaving money in the pension.


• Because of a shorter life expectancy: If your health suggests a shorter-than-average lifespan, taking tax-free cash sooner can help you use and enjoy your money while you can. It's wise to seek financial advice in such cases to ensure you're making a sustainable decision.

• You need more income: Pensions are designed to generate income. If you take the full tax-free cash upfront, you reduce the size of your remaining pension fund, or your future guaranteed income if you have a defined benefit pension.


• You would benefit from tax-free income over time: You don’t have to take all your tax-free cash in one go. Instead, you can take it gradually, allowing a portion of each pension withdrawal to be tax-free. This arrangement is known as Uncrystallised Funds Pension Lump Sums (UFPLS). It can be very efficient when combined with other income sources like a State Pension or rental income, helping to keep your overall tax bill lower across retirement.


• Leaving the tax-free portion invested may grow it further: If you delay taking tax-free cash and leave your pension invested, the 25% portion you're entitled to could increase in value as your fund grows. This means more tax-free cash could be available to you later.

If you have a defined contribution pension, you can take your money as a series of lump sums rather than buying an annuity or going into drawdown. This option is called Uncrystallised Funds Pension Lump Sums (UFPLS). Here's how it works:

• Withdrawals: UFPLS payments are taken directly from uncrystallised pension funds (where the money is still invested and hasn't been moved into drawdown). You can take them as a one-off lump sum or as multiple withdrawals, depending on your needs and what your provider allows.


• Tax treatment: Each UFPLS payment is split—25% is tax-free, while the remaining 75% is added to your income for that tax year and taxed at your marginal rate.


• Impact on future contributions: Taking UFPLS usually triggers the Money Purchase Annual Allowance (MPAA), which reduces your annual DC pension contribution limit from £60,000 to £10,000 (2025/26 figures). This can limit your ability to rebuild pension savings afterward.


• Other things to consider: UFPLS offers greater flexibility and tax efficiency than annuities, but not all pension schemes offer UFPLS, so you’ll need to check with your provider before proceeding.

Calculate My Pension is the ideal tool to help answer this question. The main considerations are:

• Accumulating Current Fund plus Future Contributions — this requires a cashflow model that takes into account fund growth, charges and inflation.
• Required Retirement Income — there is a separate FAQ section on this topic. You need to know how much income you will need in retirement in order to determine whether or not you have the funds to provide that income. The amount you require may be lower in the later years of retirement.
• Affordable Retirement Income — calculating this also requires a cashflow model of retirement income, allowing for all the different sources of income commencing at different times. You can either work out whether your funds will run out at a certain age, or target a certain age for your funds to run out by.
• Longevity — how long will you need to provide an income from your funds whilst still alive. You can find out the average life expectancy for someone your age, but you may want to be cautious in your planning, in case you live longer than expected. Purchasing an annuity at a certain point can reduce the risk of funds running out.
• Uncertainty & Risk — to understand the risks involved, it is necessary to investigate the effect of altering the assumptions in the cashflow model. The results may be quite sensitive to changes in fund growth and inflation. The amount you can afford to take from your pension may vary over time.
• Planning as a Couple — if you and your partner are planning to retire at the same time, it makes sense to coordinate your retirement planning.

The answer to this is closely related to the first question, above. The key considerations are the same. But to calculate the exact income that is affordable, given your current retirement provisions and taking into account the state pension, requires a different approach to cashflow modelling.

The aim is calculate the level of income that can be maintained throughout retirement, up to a specified age, given a set of assumptions about fund growth, charges and inflation. This requires the following process:

• Simulate your retirement with a cashflow model on a given level of income and note the funds remaining at the end.
• Adjust the level of income being simulated up or down depending on whether there are funds remaining at the end, or if funds have been exhausted.
• Repeat steps 1 and 2 until the simulation ends up with funds being exhausted exactly at the specified age. The initial level of income in the final simulation is the income you can afford.

This is exactly how Calculate My Pension works.

The earliest you can access private pension savings is age 55 , rising to 57 in 2028.

If you want to retire before this age, you can fund the years before you pension becomes accessible with income from an ISA.

Calculate My Pension can help with modelling this scenario, confirming that you have enough funds in your ISA to afford to retire at your chosen early retirement age.

No, you cannot take your State Pension before your State Pension Age. However, you can defer claiming after reaching State Pension Age to increase your payments by approximately 1% for every nine weeks deferred (around 5.8% per year).

Yes. Most defined benefit schemes permit early retirement—commonly from age 55 (some from age 50)—but with actuarial reductions to account for the longer payment period.

To investigate this you can:

• Contact your scheme administrator to request an early retirement quote and view the impact on your benefits. This would be required for smaller schemes where the reduction factors may not be published.
• Search the internet (or ask our AI Assistant) for the early retirement reduction factors relevant to your scheme. Then input those reduction factors in the Assumptions section in the Inputs page.
• Alternatively, just use the default early retirement factors already populated if you want a general guide. These factors are taken from the Pension Protection Fund so will be less generous than most schemes, meaning the factors are prudently low. So in reality, you are likely to get more.

Investing for retirement typically involves a long-term approach, where time in the market helps smooth out short-term volatility. It’s important to understand your risk tolerance, investment time horizon, and financial goals to choose the right portfolio strategy. Regular reviews and diversification are also key to managing risk effectively.

Main investment types include equities (shares), bonds (fixed income), property, and cash or cash equivalents. Each has different levels of risk and return. Many pension and ISA platforms offer multi-asset or diversified funds which include a mix of these asset types.

Yes, many people choose to gradually shift from higher-risk to lower-risk investments as they approach retirement. This is often referred to as “de-risking” or a “glide path” strategy, helping to protect your pension fund from market downturns when you're about to start drawing an income from it.

Tax can significantly impact your investment returns. Using tax-efficient accounts such as pensions and ISAs can shelter your investments from income tax, capital gains tax, and dividend tax. The choice of wrapper is just as important as the investments themselves for long-term planning.

Inflation reduces the purchasing power of your money over time, so it’s important to invest in assets that have the potential to grow faster than inflation. Equities and property tend to outperform inflation over the long term, whereas cash and low-yield bonds may struggle to keep up. Reviewing your portfolio's real (after-inflation) returns is key to protecting your retirement income.

Investment charges can erode your retirement savings over time, particularly over decades. Even small annual fees can add up to a significant difference in your final pot size. It’s important to review fund and platform charges and compare them against other options regularly.

In retirement, your investment strategy typically shifts from growth-focused to balancing income, capital preservation, and longevity. You may reduce equity exposure and increase bonds and cash to manage risk. You might consider income sources like annuities, dividend shares, or inflation-linked bonds.

Ethical and sustainable investments aim to align your financial goals with your values. These options can focus on environmental, social, and governance (ESG) criteria. Many pension and ISA providers now offer funds that cater to these preferences without sacrificing potential returns.

Sustainable investing is an investment approach that considers environmental, social, and governance (ESG) factors alongside financial returns. It aims to invest in companies or projects that contribute positively to society and the planet.

The main principles include integrating ESG analysis into investment decisions, actively engaging with companies, avoiding harmful industries, and promoting transparency and ethical business practices.

Common approaches include ESG integration, negative screening (excluding certain sectors), positive screening (selecting top ESG performers), impact investing, and shareholder advocacy.

Why People Choose Sustainable Investing:

• Aligning values with money: You support causes you care about.
• Long-term performance: Many ESG-focused funds perform as well or better than traditional funds — sustainability can be good business.
• Managing risk: Companies with poor ESG practices may be more exposed to regulatory fines, lawsuits, or reputational damage.
• Future-proofing: Growing pressure from consumers, governments, and investors is likely to favour well-managed, ethical companies.

Absolutely — yes, you can build a fully diversified portfolio using only sustainable investments. In fact, there are more options than ever across all asset classes and risk levels that focus on sustainability.

What a Diversified Sustainable Portfolio Could Include:

1. Sustainable Equity Funds

• Invest in companies with strong ESG credentials.
• Diversify by region (UK, US, Europe, emerging markets) or by theme (clean energy, healthcare, tech).
• Examples include: MSCI World ESG Screened, FTSE4Good, or iShares Global Clean Energy ETF.

2. Green Bonds / Sustainable Fixed Income

• Bonds issued to fund environmentally or socially beneficial projects.
• Options include corporate green bonds, government sustainability bonds, or ESG bond funds.

3. Sustainable Multi-Asset Funds

• Invest in a mix of stocks and bonds screened for ESG criteria.
• Ideal for those seeking instant diversification with a sustainable tilt.

4. Ethical REITs / Property Funds

• Some Real Estate Investment Trusts (REITs) focus on energy-efficient buildings or affordable housing.

5. Thematic Funds

• Target specific sustainability goals like clean water, climate change, or the circular economy.
• These can add focus or impact to a portfolio but should be balanced with broader ESG funds.

Fees vary widely. Actively managed ESG funds may charge higher fees than passive ESG index trackers. Always check the ongoing charges figure (OCF) and compare providers.

You can access these through specialist funds, green bonds, or investment platforms that offer exposure to renewable energy, clean tech, and infrastructure projects. Some ISAs and pensions may also include them as investment options.

For Defined Contribution Pensions:

• What You're Transferring: You're transferring a pot of money. The value of this pot is based on the contributions that have been made (by you and/or your employer) and the investment performance of the funds within the pension.
• Destination: You're transferring to another defined contribution scheme, such as a Personal Pension, a Self-Invested Personal Pension (SIPP), or a different employer's workplace pension.
• Risk: The main risk is investment risk. When you transfer, you're taking responsibility for managing the investments within your new pension. You're exposed to the potential for market fluctuations to impact the value of your pension pot. You also have to make decisions about where to invest the money.
• Process: Generally simpler than transferring a defined benefit pension.
• Advice Requirement: Not usually required unless the transfer involves giving up valuable guarantees or benefits within the existing DC scheme.
• Flexibility: Transfers often offer more flexibility in terms of investment choices and access to your money (especially with a SIPP).

For Defined Benefit Pensions:

• What You're Transferring: You're giving up a guaranteed future income stream for life. This income is based on your salary and years of service in the company. The scheme promises to pay you a certain amount each year in retirement, regardless of investment performance.
• Destination: Involves converting the value of your guaranteed income stream into a lump sum "transfer value" and moving it to a defined contribution scheme.
• Risk: The big risk is giving up a guaranteed income for life. You're taking on all the investment risk yourself. If your investments don't perform well, you could run out of money in retirement. There's also the risk of making poor withdrawal decisions.
• Process: More complex and heavily regulated than DC transfers.
• Advice Requirement: Mandatory if the transfer value is over a certain amount (currently £30,000). This is because giving up a guaranteed income is considered a high-risk decision. The advisor must be qualified to advise on DB transfers.
• Flexibility: While you gain flexibility in terms of access and investment choices, you lose the security of a guaranteed income.
• Safeguarded Benefits: Transfers from Defined Benefit Schemes can mean losing valuable benefits such as guaranteed income for life, inflation-linked increases, and death benefits.

While it's generally advisable not to transfer a defined benefit (DB) pension due to the loss of a guaranteed income, there are specific circumstances where a transfer might be considered. However, it's crucial to weigh these potential benefits against the significant risks and seek professional financial advice before making any decision.

Here are some reasons why someone might consider transferring a DB pension:

1. Desire for Greater Control and Flexibility

• Investment Choices: You want more control over how your pension is invested. A DB scheme does not allow members to choose where their money is invested, while a defined contribution (DC) scheme like a SIPP (Self-Invested Personal Pension) offers a wider range of investment choices.
• Access to Funds: You want the ability to access your pension pot more flexibly, potentially taking larger lump sums or varying your income withdrawals. DB schemes usually provide fixed income payments.
• Lump Sum Needs: You have a specific need for a large lump sum of cash, such as to pay off debts, make a large purchase, or invest in a business. While DB schemes may offer a tax-free lump sum, it might not be as large as the transfer value.

2. Concerns About the Scheme's Solvency

• Employer Insolvency: You are worried about the financial stability of the sponsoring employer and the potential for the pension scheme to become underfunded or insolvent. While the Pension Protection Fund (PPF) provides a safety net, it may not fully compensate you for the loss of your benefits.
• Important Note: This concern is often overstated. The PPF provides significant protection.
• Scheme Underfunding: You believe the scheme is poorly managed or has a high risk of becoming underfunded, even without employer insolvency.

3. Potential for Enhanced Death Benefits

• Inheritance: You want to pass on more of your pension wealth to your beneficiaries. DB schemes typically provide a spouse's pension and potentially some lump sum death benefits, but the transfer value in a DC scheme could potentially be larger and more flexible for your heirs, particularly if you die relatively young.
• Tax Efficiency: DB scheme death benefits are often taxed at a higher rate than DC schemes.

4. Health Concerns and Life Expectancy

• Reduced Life Expectancy: You have a significantly reduced life expectancy due to ill health and believe that you won't live long enough to receive the full value of your DB pension benefits. In this case, you might prefer to take the transfer value and use it for other purposes or pass it on to your family.
• Important Note: This is a very sensitive and personal decision that requires careful consideration and professional advice.

5. Estate Planning Purposes

• IHT Planning: You want to use the transfer value to manage your estate for Inheritance Tax (IHT) purposes. While pensions are generally outside of your estate for IHT, transferring to a DC scheme might offer more flexibility in estate planning, although this is a complex area and should be discussed with a financial advisor.

6. Change in Personal Circumstances

• Relocation Abroad: You are planning to move abroad permanently and want to have more control over your pension income and investments in a different country.
• Divorce: As part of a divorce settlement, a pension sharing order may require the transfer of a portion of your DB pension to your ex-spouse.

Important Considerations & Cautions: Always seek regulated financial advice before transferring a DB pension. It’s a complex and often irreversible decision with long-term consequences.

While transferring a defined contribution (DC) pension is generally less risky than transferring a defined benefit pension, it's still a decision that requires careful thought. Below are common reasons someone might consider a DC pension transfer:

1. Lower Fees and Charges

• You may find a scheme with lower management, platform, or investment charges. Even small fee differences can significantly affect long-term returns.
• This is especially relevant if you have an older pension with higher legacy fees.

2. Better Investment Options

• You may want access to more investment choices, such as specific funds, asset classes (like property or private equity), or ethical investing strategies.
• You might feel other schemes offer better-performing funds or options better suited to your risk profile and goals.
• Self-Invested Personal Pensions (SIPPs) typically offer the broadest investment range.

3. Consolidation for Simplicity

• If you have multiple DC pensions from previous jobs, combining them into one pot can simplify management.
• A single scheme makes it easier to track growth, adjust investments, and draw income at retirement.

4. Better Customer Service and Technology

• You may be unhappy with your current provider’s service or support.
• Modern providers often offer better online tools, clearer interfaces, and more responsive customer care.

5. More Flexible Access Options

• Some schemes offer greater flexibility in drawdown, allowing for varied or larger withdrawals.
• SIPPs often provide the most flexible access, including the option to take uncrystallized funds pension lump sums (UFPLS).

Common Pension Transfer Charges

1. Exit Fees

• Some providers charge an exit fee when transferring out. For individuals over 55, this is capped at 1% of your pension pot’s value by the FCA. Younger savers may face higher fees, sometimes up to 5%.

2. Set-Up or Administration Fees

• While many providers don’t charge for opening a new pension, some apply admin fees during the transfer. Always check with both current and new providers for any applicable costs.

3. Financial Advice Fees

• Transferring a defined benefit pension worth over £30,000 requires regulated financial advice. Advisers charge for this service, and the fee depends on the pension’s complexity and the advice given.

4. Annual Management Charges (AMCs)

• Your new provider may charge AMCs for managing your pension investments. These typically range from 0.3% to 1% annually, depending on provider and fund choice.

5. Investment and Fund Charges

• In addition to AMCs, some investment funds have extra costs, including performance-based fees. It’s important to understand these to avoid returns being eroded over time.

If you’re transferring a defined benefit pension worth over £30,000, regulated financial advice is required by law. It’s also wise for any complex transfer decisions.

Potential Benefits of Combining Pensions:

• Simplicity: Having a single pension pot means fewer statements, fewer passwords, and less admin at retirement.
• Lower Charges: Older pensions often have higher annual charges. Newer providers may offer better value with lower fees.
• Better Investment Choices: Modern pensions tend to offer more choice, including ethical funds and index trackers.
• Easier to Track Your Retirement Goals: With all your savings in one place, it’s easier to see your total value and plan when and how to take income.
• Avoiding Lost Pensions: Consolidating helps ensure you don’t lose track of smaller pots from past jobs.

Cashflow modelling projects your income, expenditure, assets, and liabilities year by year into the future. It helps you visualise whether you’re on track to meet your financial goals, especially for retirement, by using assumptions about inflation, investment growth, and spending patterns.

Key inputs include current savings and pensions, expected future contributions, planned retirement age, desired retirement income, expected investment growth, inflation, and life expectancy. These assumptions influence how long your money might last.

Cashflow modelling helps determine whether your retirement plans are affordable and sustainable. It shows if your income and assets will last through retirement and highlights the impact of changes like retiring earlier, adjusting spending, or altering investment risk.

It gives you a clearer picture of your financial future, supports better decision-making, and helps you plan with confidence. It’s especially useful for seeing the long-term impact of your spending, saving, and investment decisions.

Models rely on assumptions which may not hold true over time. Unexpected events like market crashes or inflation surges can affect outcomes. It's a helpful guide, but not a guarantee of future reality.

As well as relying on uncertain assumptions and fund growth and inflation, cashflow models will use approximations to the real cashflows where this would not materially impact the results of the model.

For example, calculating cashflows on an annual basis rather than monthly will give a slightly different answer, but this would be small compared to the uncertainty in the assumptions. Modelling monthly cashflows could be considered 'spurious accuracy'.

A typical long-term assumption for a diversified portfolio is 4–6% per year after charges but before inflation. Conservative forecasts are advisable, especially as you get closer to retirement.

Many models use 2–3% per year for long-term inflation. This reflects central bank targets and historic averages, though you may wish to adjust it based on your own outlook or short-term concerns.

Not always. While historical data provides context and helps set expectations, future returns may differ due to changing economic conditions, regulations, or investor behaviour. Use history as a guide, not a guarantee.

Firstly, your existing funds are accumulated with future contributions and fund growth up your selected retirement age to calculate fund values at retirement.

The aim is then to calculate the level of income that can be maintained throughout retirement, up to a specified age, given a set of assumptions about fund growth, charges and inflation. Calculate My Pension does this using the following process:

• Simulate your retirement with a cashflow model on a given level of income and note the funds remaining at the end.
• Adjust the level of income being simulated up or down depending on whether there are funds remaining at the end, or if funds have been exhausted.
• Repeat steps 1 and 2 until the simulation ends up with funds being exhausted exactly at the specified age. The initial level of income in the final simulation is the income you can afford.

This level of affordable income is then compared with your desired retirement income projected forward with inflation and a surplus or shortfall calculated.

• Projections are done annually rather than monthly.
• Fund growth and inflation are treated as fixed (deterministic) values, not varying over time.
• A single inflation rate is used rather than separate rates for prices and earnings.
• The first year's cashflow is included in full, as if all changes take place on your birthday.
• This implies it is your birthday today when using the calculator (Happy Birthday!)
• Your State Pension Age calculation also relies on the assumption that today is your birthday.
• Increases to your State Pension occur on your birthday (which is assumed to be April 6th!, so an implicit assumption is that today is April 6th).
• It is assumed that you require a retirement income that rises with inflation.
• Any tax-free lump sum chosen is assumed to be spent immediately, rather than invested (e.g. in an ISA).
• You only have either a cash ISA or a stocks and shares ISA, not both.
• When planning as a couple, an assumption is made that you will retire at the same time as your partner.
• If no tax-free lump sum is taken at retirement, the model assumes use of Uncrystallised Funds Pension Lump Sums (UFPLS) to preserve the 25% tax-free element.
• If you are already retired, there is an approximation related to the cumulative tax free cash (TFC) limit that you have left. The model assumes you have just retired, so the amount of TFC taken so far is the TFC percent you specified multipled by the current fund. This apprximation would be unnecessary if you could enter the current value of cumulative TFC taken. This will be in a future release.