Planning for retirement is one of the biggest financial challenges we face.
It’s no surprise, then, that some people end up feeling they should have done things differently. Nearly a third of retirees in a 2025 Which? survey said they weren’t entirely happy with the way they had approached their retirement.
As a result, 41% said they were now concerned about their financial situation.
Whether you’re still saving for retirement or are starting to think about how you’ll access your pension, here are some common mistakes to avoid.
1. Put off your retirement planning
There are two key stages of retirement planning: building up your savings and then deciding how (and when) to turn your savings into an income.
In both cases, the earlier you start, the better position you’ll be in.
You can usually access money in a private pension at 55 (rising to 57 in 2028), although many people choose to wait until later.
If you want support with this decision but are put off by the cost of financial advice, you can get free guidance from Pension Wise. You must be over 50 and have a defined contribution pension to get access to its one-hour appointments.
As well as any private pension savings, you’ll also get the state pension to help fund your retirement – but not until you turn 66.
It’s worth getting a state pension forecast well in advance to get an idea of how much this will be. You can also weigh up whether it’s worth topping up your state pension.
- Find out more: How to plan for retirement
2. Cut your pension contributions
It might be tempting to cut or stop your payments into a pension if money gets tight, but this will end up costing you in the long run.
The minimum you have to pay into a workplace pension is 8% of your salary. This is made up of 5% from you (including tax relief from the government) and 3% from your employer.
It’s even better if you can make extra contributions from time to time – for example, if you get a bonus. This will make a big difference to your pot over the long term.
Calculations by Standard Life show that an employee increasing their contributions from 5% to 7% at the age of 22 could end up with a pot worth an extra £52,000 (adjusted for inflation) by the age of 68.
- Find out more: How much will I need to retire?
3. Lose track of your pensions
When you move to a new employer, your pension won’t automatically follow you.
This means that over time you can build up multiple pension pots in different places, making it hard to keep track of them all.
Start by making a list of the employers you’ve worked for in the past, and check if you have pension paperwork for each of them.
If you can’t find it, contact the relevant employer or the pension company that manages the scheme.
If you’re not able to find the contact details for a previous employer or pension provider, you can use the government’s free pension tracing service. You simply need to enter the name of an employer or pension provider.
- Find out more: Should I bring my pensions together in one place?
4. Dismiss annuities
Once the default way to turn your pension savings into a retirement income, annuity sales took a nosedive after 2015, following the introduction of rules that gave you more choice about how to access your money.
The more popular option is now drawdown – where, instead of swapping your pension pot for a guaranteed income, you leave it invested and make withdrawals when you need to.
But sales of annuities have surged over recent years, thanks to the improved rates on offer.
The appeal of annuities may also be boosted as a result of plans to bring pensions into the scope of inheritance tax from 2027, as the fact that payments typically stop when you die is likely to be considered less of a drawback.
- Find out more: Annuities explained
5. Forget about tax
You can take up to 25% of your pension as a tax-free lump sum (up to a maximum of £268,275 across all your pensions), but anything above that will be added to the rest of your income and taxed in the same way.
You’ll pay tax on income above your personal allowance of £12,570, and it’s worth bearing in mind that a large withdrawal from your pension can push you into a higher tax bracket.
Retirees also now need to factor in the possibility of an inheritance tax bill, because from April 2027, inherited pensions will no longer be exempt from inheritance tax.
Any money that’s left in a defined contribution pension will be included in your estate for inheritance tax purposes. This will mean tax at 40% on anything above the tax-free thresholds.
The same applies if you’ve started taking money from your pension, either through drawdown or lump sum withdrawals.
One of the simplest ways to reduce or avoid an inheritance tax bill is to give money away during your lifetime.
Gifts of any value leave your estate for inheritance tax purposes seven years after you make them. There are also various tax-free gifting allowances you can take advantage of.
- Find out more: Will my pension be subject to inheritance tax?
6. Take your tax-free cash without a plan
There was speculation before the 2025 Budget that the percentage of tax-free cash you can take from your pension would be cut, or the overall cap of £268,275 reduced.
This led to more people choosing to take their tax-free cash – but in the end, the Chancellor didn’t announce any changes to these rules.
HMRC confirmed that applications to take tax-free cash could not be cancelled, highlighting the risks of making a big financial decision purely on the basis of rumours.
And reinvesting the money straight back into your pension could breach pension recycling rules that are aimed at preventing people from benefitting again from tax relief. This can result in you receiving a penalty tax charge of up to 55% of the tax-free lump sum.
Before taking your tax-free lump sum, think carefully about what you’ll do with the money. The longer you leave your pension untouched, the longer it has to grow – and to do so free of tax.
- Find out more: Rules for taking a lump sum from your pension