The Pension Checklist for the Year Before and Year of Retirement

The transition from pension accumulation to pension income is one of the most significant financial events in a person's life. Get it right and retirement runs smoothly, with income structured tax-efficiently and the estate organised for the next generation. Get it wrong and the consequences can include avoidable tax overpayments, missed entitlements, a suboptimal annuity rate, or estate planning left unresolved.

This guide provides a systematic checklist for the year before retirement, the actions required at retirement itself, and the key reviews to complete in the first year as a pension recipient. A separate section addresses the additional steps required for expats drawing UK pensions from overseas.

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Twelve Months Before Retirement

State Pension and National Insurance

Check your State Pension forecast. Go to gov.uk/check-state-pension. The forecast shows your current expected State Pension, the number of qualifying NI years, and how many more years would increase it. You will need a Government Gateway account to access this online. If your account is blocked from an overseas location, request a paper statement (BR19 form).

Review your NI record for gaps. The forecast page shows years when you did not make sufficient NI contributions. For each gap year, you may be able to pay voluntary Class 3 contributions (£18.40 per week, approximately £956.80 per year for 2026/27) to fill the gap and increase the State Pension. Each qualifying year added increases the State Pension by approximately £358 per year for life (1/35 of the full new State Pension) — a break-even of approximately 2.5 to 3 years.

Check the deadline for filling gaps. Rules on which years can be filled, and at what cost, change periodically. Verify current rules at gov.uk or with an adviser.

Consider State Pension deferral. If you have significant other income in the year you reach State Pension age (66), deferring the State Pension for one to two years increases it by approximately 5.8% per year deferred. Assess whether the deferral would leave State Pension income in a lower-tax period.

Pension Inventory

List every pension pot you hold. Include: current workplace pension; all deferred workplace pensions; personal pensions; SIPPs; any SSAS membership; any QROPS. For each, note: provider, policy/scheme number, current fund value, estimated retirement income projection, and the contact details.

Check for lost pensions. Use the Pension Tracing Service at gov.uk/find-pension-contact-details if you suspect there are employer pensions you have lost track of. Employers are required to have registered their pension scheme, and the service searches by employer name.

Request illustrations from each provider. Ask each pension provider to send a retirement income illustration projected to your chosen retirement date. These show:

• The projected fund value at retirement
• The projected income if used for drawdown
• The projected annuity income (open-market option equivalent)
• The estimated tax-free cash (pension commencement lump sum) available

These illustrations use standardised growth assumptions (low 2%, medium 5%, high 8% per annum before charges). They are not forecasts but provide a useful benchmark.

Benefits and Guaranteed Rights

Check for Guaranteed Annuity Rates (GARs). Ask each pension provider whether a GAR is attached to the policy. A GAR guarantees conversion of the fund to an annuity at a specified rate (often 10-14% per annum), which may be significantly higher than the open-market rate. If a GAR exists, activating it may be the most valuable financial decision available to you.

Check for protected tax-free cash. If any pension was set up before 6 April 2006 (A-Day), verify whether a protected right to take more than 25% tax-free exists. If so, document this carefully — the administrator must confirm the protection.

Check the Pension Protection Fund position. If any pension is in a DB scheme whose employer has since gone insolvent, check whether the pension is in PPF assessment or payment. PPF benefits differ from full scheme benefits.

Financial Planning

Decide your retirement date. This determines the pension input period, the NI year, and the tax year in which you crystallise the pension. Choosing a retirement date in the middle of the tax year (rather than 6 April) can have significant tax implications.

Decide whether to take the Pension Commencement Lump Sum (PCLS). 25% of uncrystallised funds can be taken as a tax-free PCLS (subject to the lump sum allowance of £268,275). Taking the full PCLS reduces the pension pot available for income. For many people, the PCLS is the right choice — a tax-free lump sum to clear debts, fund home improvements, or provide a cash buffer. But it is not automatic — consider carefully.

Decide between drawdown and annuity (or a blend). Drawdown preserves capital, passes wealth to the estate (until April 2027), and allows flexible income. An annuity provides guaranteed income for life, with no investment risk. A blend of both — using some of the fund to buy an annuity covering essential expenses, leaving the rest in drawdown — is a genuinely sensible middle path for many retirees.

Review the expression of wishes on every pension. The expression of wishes (nomination form) directs the trustees on who should receive the pension fund on your death. Review every one — they may be 10-20 years old and reflect a completely different family situation.

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At Retirement: Actions Required

Notice to Pension Providers

Give 2-3 months' notice. Contact each pension provider you intend to draw from. Most require written notice of your intention to retire. Starting the process 2-3 months before your intended first payment date allows time for:

• Administration
• Tax code setup (providers apply PAYE to pension income)
• The annuity shopping process (if applicable)
• Transfer of any funds being consolidated before retirement

The Annuity Shopping Exercise

If taking any annuity — exercise the open-market option. You have the legal right to shop around for the best annuity rate (this is known as the "open-market option"). Your existing pension provider is not obliged to offer you the best rate — in practice, they rarely do. Use an annuity comparison service or an adviser to obtain quotes from multiple providers.

Check for enhanced annuity eligibility. Enhanced (or impaired life) annuities pay a higher income to people with health conditions or lifestyle factors that reduce life expectancy. Conditions that may qualify include type 2 diabetes, heart disease, stroke history, elevated BMI, high blood pressure, and many others. Enhanced rates can be 10-30% higher than standard rates. Always answer the health questionnaire — if in doubt whether a condition qualifies, include it.

Tax Code Setup

The emergency tax problem at the first withdrawal. The first pension withdrawal will be subject to PAYE. If your pension provider does not hold a current PAYE code, they will apply an emergency Month 1 code, which often results in significant over-deduction. Plan to reclaim overpaid tax using the relevant HMRC form (P55, P50Z, or P53Z) as soon as possible after the first withdrawal.

Inform HMRC of all income sources. If you have multiple pensions starting in the same year, one will get the personal allowance and standard PAYE code; the others may initially have a BR (basic rate, no personal allowance) code. Ensure HMRC is aware of all pension income sources so tax codes are adjusted correctly.

Drawdown Designation

Complete the drawdown paperwork. To draw from a SIPP or personal pension in drawdown, you must formally "designate" funds into flexi-access drawdown. This triggers the crystallisation event and starts the drawdown arrangement. Complete the required forms promptly — providers vary in their processing time.

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The First Year in Retirement

Income Structure

Establish your income structure and amounts. In the first April after retirement, review your complete income picture:

• State Pension (if started)
• Drawdown withdrawals (frequency and amount)
• Annuity income (if applicable)
• ISA withdrawals (if required)
• Rental income, investment income
• Part-time employment income (if any)

Structure withdrawals to use the personal allowance and stay within the basic rate band where possible.

Set up the cash buffer. Maintain 3-6 months of living expenses in accessible cash. Replenish from drawdown annually or as required — never draw from the pension in an emergency, as emergency withdrawals are poorly timed and typically expensive.

Tax Review

First self-assessment return. Pension drawdown income is received gross or with PAYE deducted. If any over- or under-payment of tax has occurred (particularly from the emergency PAYE at first withdrawal), the self-assessment return (if applicable) or a HMRC repayment claim will resolve this.

Consider whether a pension income splitting strategy applies. If married, and one partner has a higher pension income than the other, tax efficiency may favour directing more of the income to the lower-earning partner (particularly through pension contributions before retirement). This is a planning point for future years rather than for the first year alone.

NI and State Pension

Verify the State Pension amount on first payment. The payment may differ from the forecast (due to updates to NI records, changes in the triple lock uplift, or administrative errors). Verify the first payment and contact the Pension Service if it is not as expected.

Consider topping up the NI record (if below State Pension age). If you retire before State Pension age (66) and still have gaps in the NI record, voluntary contributions can still be made until you reach State Pension age. This may be the last opportunity to fill gaps.

Estate Planning

Update your will after retirement. The financial and estate planning position changes significantly at retirement. The pension may now be in drawdown; ISAs may have grown; property may be the primary estate asset. Review the will to ensure it reflects the current position.

Review lasting powers of attorney (LPA). Both financial and health and welfare LPAs should be in place. If not already registered with the Office of the Public Guardian, do so. An LPA ensures that someone you trust can act on your behalf if you lose mental capacity — this is particularly important when managing pension drawdown arrangements.

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For Expats Drawing UK Pensions from Overseas

Establish non-resident tax position on pension income. If you are non-UK resident, UK pension income may be taxable only in your country of residence (depending on the double taxation treaty). File a claim for NT (No Tax) coding with HMRC using Form R43 or through a self-assessment return. Without an NT code, UK pension providers will deduct PAYE at source and you will need to reclaim it through HMRC.

Set up a UK bank account for UK pension receipt. The State Pension and many UK pension providers require a UK bank account for direct payment, or will remit to an overseas account with potential delays. Maintaining a UK bank account (Barclays, Lloyds, HSBC, or a challenger bank with international access) simplifies receipt.

Apply for treaty relief if applicable. If your country of residence has a double taxation agreement with the UK that gives taxing rights on UK pension income to the residence country, apply for treaty relief at source through HMRC. This prevents double taxation — paying both UK PAYE and local income tax on the same pension payment.

NRLS for UK rental income. If you have UK rental income as well as pension income, you may be subject to the Non-Resident Landlord Scheme (NRLS). Pension income and rental income are managed separately under UK tax rules for non-residents.

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FCA Compliance Caveat

The value of pension investments can fall as well as rise. Annuity rates change daily. Tax rules, State Pension legislation, and NI contribution rates are subject to annual review and change. This guide reflects the position as at 2026 and is for general information only. Individual circumstances differ significantly; this checklist provides a framework, not personalised advice. Seek advice from an FCA-regulated financial adviser before making decisions about retirement income, annuity purchase, or pension drawdown strategy.

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How Global Investments Can Help

Global Investments provides retirement planning advice for high-net-worth individuals and UK expats, including the full range of decisions from the year before retirement through to established drawdown management. Whether you need help completing the pension inventory, arranging regulated drawdown advice, or managing UK pension income from overseas, our team can guide you through each step.

Contact us to arrange a retirement planning consultation.