Are you facing a retirement challenge?

Post by Mearns & Company in News

With double digit inflation on the horizon, you may need to reassess your plans.

In May 2022, a report from the Bank of England’s Monetary Policy Committee bleakly predicted “We expect inflation to rise to around 10% this year”. The Bank pins the blame on rising energy prices, the war in Ukraine and supply chain difficulties stemming from China’s Covid-19 lockdowns. None of that trio has a clear end date, but the Bank expects inflation to be “close to our 2% target in around two years”.

Consider all the options

Whether or not their forecast proves correct, if you are close to, or about to, retire the immediate outlook is unsettling and many will be worried about how they are going to manage. So, what should you do?

The starting point is to do nothing until you have sought advice. Some aspects of retirement can be impossible to unwind once set in motion. You should only proceed when you are confident about what happens next. Your pension arrangements may state a specific retirement age, but you may still have choices. Even the State pension (currently payable from age 66) can be deferred.

Crunch the numbers

Your next step is to work out your likely expenditure and income in retirement. This needs to be a realistic assessment – a recent survey found that two fifths of 2021 retirees were already spending more than they had expected. We can help with the complex calculations using software that can handle assumptions about differing rates of inflation (considering the impending 10%) and investment returns.

Identifying future income and spending patterns is vital in understanding what your options are. For example, cash flow analysis can show whether the level of investment risk that you are normally comfortable with is compatible with your retirement spending plans.

Bear in mind that at age 65, according to the Office for National Statistics:

  • The average man will live for another 20 years, with one in four surviving until age 92; and
  • The average woman will live for another 22 years, with one in four reaching 94.

If the calculations suggest that you will outlive your retirement fund – a common concern for recent retirees – then you could consider revising your expenditure plans or accepting that at some point you will need to trade down to a smaller property or look at other options to extract value from your home.

At the opposite end of the financing scale, the data might show all your needs can be met with an index-linked annuity, carrying no investment or duration risk. However, sadly that is unlikely as at current RPI-linked annuity rates the standard lifetime allowance of £1,073,100 will provide a monthly income of about £2,850 before tax.

Could you work longer?

In the worst case, an analysis of your retirement cashflow may force you to consider deferring or phasing in retirement. That may seem an unpalatable option, but it is better to be aware of the situation before your earnings have ended. A survey of 2022 retirees found that a fifth were retiring later than they had originally planned, with the main reason for the delay being not having saved enough. An extra period of work – whether full or part time – reduces the pressure on your retirement savings and may allow you to continue your contributions rather than start making withdrawals.

For advice tailored to your circumstances, please contact us.


The value of pensions and investments and the income they produce can fall as well as rise. You may get back less than you invested.

Past performance is not a reliable indicator of future performance.

Investing in shares should be regarded as a long-term investment and should fit with your overall attitude to risk and financial circumstances.

Occupational pension schemes are regulated by The Pensions Regulator.

Equity release will reduce the value of your estate and can affect your eligibility for means test

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