Retirement is no longer a single moment
For many people, retirement used to look like a clear line: full‑time work one day, retirement the next. That’s becoming less common.
People are living longer, staying healthier, and remaining active well into later life. As a result, retirement is increasingly something you ease into. You might choose to work part-time, take on consultancy work, or run a small side project. Some people do this to supplement pension income. Others do it because they enjoy the structure, social contact, or sense of purpose work provides.
Earning for longer can reduce pressure on your savings and give you more choice over when you start drawing on them. It can also change the role your savings play, with different income sources becoming more important at different stages of later life.
That’s why retirement planning today is less about a single pot of money and more about how different assets and income streams work together over time.
How do most people fund retirement?
For the majority of us, retirement income comes from a mix of sources. A pension usually sits at the centre, but it’s supported by other assets and decisions made along the way.
Common sources of retirement income include:
- Pension savings
- Property wealth
- Investments held outside a pension
- Income from a business or money raised through a business sale
- Earnings from part‑time or flexible work
Sometimes these sources are carefully planned. Sometimes they evolve as circumstances change – careers take unexpected turns, family situations shift, or priorities change over time.
What matters isn’t having the ‘perfect’ mix but understanding how your own sources of retirement income blend together, and where the strengths and vulnerabilities might be.
Taking effect from April 2027, proposed changes to inheritance tax rules are expected to affect how pensions are treated when you pass away.
At present, most unused pension funds sit outside your estate for inheritance tax purposes. This has made pensions a tax‑efficient way to pass on wealth to the next generation.
Under current proposals, any pension funds you haven’t yet taken when you pass away are likely to be included in your estate and assessed for inheritance tax. This doesn’t change how or when you can access your pension during your lifetime, but it may reduce the effectiveness of pensions for inheritance tax planning.
This may also influence how you think about the order in which you use different assets in retirement. Read more about what this means for your inheritance tax planning.
Property and retirement – starting with your home
Your home is often your most valuable asset, but it’s also where you live. Having somewhere suitable, comfortable, and secure to call home always comes first. Basic needs like housing are at the base of Abraham Maslow’s hallowed hierarchy of needs – the American psychologist called them “physiological needs” – for a reason.
That said, you’ll likely find your housing needs change over time. Once children have left home, a large family property may no longer feel right. It might be expensive to run, harder to maintain, or simply more space than you want.
Downsizing is a common choice, allowing you to release capital that can be used to support retirement income, invest elsewhere, or provide a financial buffer. For some, it’s also about lifestyle – moving closer to family, amenities, or the rolling hills where you hiked at weekends before you retired.
If your home is likely to play a role in funding retirement, it’s worth thinking about this well before you need to make a decision. How flexible do you want to be later in life? Would you be comfortable moving if your plans changed? How would your finances cope if the housing market was weaker when you needed to sell?
Relying heavily on property means accepting that its value – and the timing of any sale – isn’t fully within your control. Planning with a margin of safety can help reduce stress later on.
Later life mortgages and equity release
Later life mortgages and equity release products have become more common, and regulation has improved transparency compared with the past. However, these products are complex and not suitable for everyone.
They allow you to release money while continuing to live in your home. But they usually reduce the value of your estate and can be difficult to reverse, once in place.
For some people, these products can be practical ways to supplement retirement income or fund specific costs without having to move. For some people, this is much more important than for others.
These options are complex and not right for everyone. They work best when they’re considered as part of a wider retirement plan rather than resorted to as a last‑minute solution. We don’t advise on later-life lending, but we can introduce a specialist who does.
Your home can play a powerful role in supporting your retirement – it just needs careful thought and the right advice.
Buy‑to‑let property and retirement income
Some people hold property as an investment, often through buy‑to‑let. There’s a clear appeal here, especially in the UK. Property feels tangible and familiar, and rental income can feel dependable.
But being a landlord is a hands‑on commitment. It involves administration, maintenance, and managing tenants. Changes to mortgage interest relief have also altered the economics for many landlords. The new Renters’ Rights Act 2025, which is now in effect, also contains some key changes for landlords.
If property is effectively your ‘pension’, fluctuations in rental income can have a direct impact on your standard of living. Void periods, where your rental property is empty and not earning rent, don’t always arrive at convenient times. Unexpected repairs can be costly. And if you need a lump sum, property isn’t especially flexible – you can’t usually sell part of a property, and sales can take time.
Buy‑to‑let can play a role in funding retirement, but it works best as part of a broader plan rather than the whole picture. Spreading risk across different types of assets can help make retirement income more stable over time.
Investments outside a pension
Many people choose to save through individual savings accounts (ISAs) or general investment accounts because the money is accessible. That flexibility can be reassuring, particularly if retirement still feels a long way off or you want options along the way.
ISAs are tax-efficient and straightforward. Investments held outside an ISA or pension can make use of the capital gains tax allowance, although that allowance is now relatively small: £3,000 for individuals and personal representatives (who are legally responsible for someone’s estate after they pass away), and £1,500 for most trustees.
Neither option offers the same tax advantages as a pension. Pensions benefit from tax relief on contributions and the ability to take some income tax-free later on. But that doesn’t make other investments less useful.
Investments outside a pension can be an excellent complement. They can provide accessible funds for early retirement, one‑off expenses, or simply peace of mind. They’re also valuable if your pension contributions are restricted or you’ve already made full use of available allowances.
For many people, having both pension and non‑pension investments creates a helpful balance between tax efficiency and flexibility.
It’s important to remember that investing always involves risk. The value of investments – and any income from them – can fall as well as rise, and you may get back less than you invest, particularly over shorter time periods.
When a business is part of the plan
It’s common to hear business owners say, “my business is my pension”. And when things go well, a successful sale can make a significant difference to retirement plans.
However, relying on a future business sale comes with uncertainty. Timing isn’t always within your control, and valuing a business can be difficult. Market conditions, buyer appetite, and wider economic factors all play a part.
There’s also the risk of having too much riding on one outcome. If something goes wrong close to retirement, there may be limited time to adjust.
A business can absolutely form an important part of how retirement is funded. But building other savings alongside it can help spread risk and give you more options, whatever happens.
Why pensions still matter so much
With all these alternatives, it’s worth being clear: pensions are still one of the most effective ways to save for retirement.
They’re highly tax-efficient, often supported by employer contributions, and designed to encourage long‑term saving by limiting early access. For many people, the fact that you can’t easily dip into pension savings earlier in life is a strength rather than a weakness.
A pension often provides the foundation of retirement income, with other assets sitting alongside it. The point isn’t that pensions aren’t enough. It’s that retirement rarely relies on one thing alone.
A blend of savings – pensions, investments, property and, for some, ongoing work – tends to be more flexible and more resilient over time. If you plan to keep working, it might be a good chance to take on projects you’re passionate about, from time to time.
Finding the right balance in retirement planning
Effective retirement planning is about balance. That includes:
- Balancing tax efficiency with accessibility
- Balancing security with flexibility
- Balancing savings between partners
Consider asking yourself the following questions:
- Who might need income first?
- What happens if you’re in a couple and one of you stops working earlier than planned?
- How easily can your plans adapt if circumstances change?
- Which of these income sources do you expect to rely on most?
- What would happen if one of them underperformed?
Thinking these things through early can make a real difference later on. It’s not about predicting the future perfectly, but about giving yourself options.
Don’t leave it to chance
What’s unlikely to work is leaving everything to chance. The lottery could, but probably won’t, come up. An inheritance may arrive later than expected, or not at all.
Retirement isn’t funded by a single decision. It’s shaped by many small ones, made over time. Thinking ahead – and building a thoughtful mix of savings and income sources – can help you feel more confident and in control.
For most people, the question isn’t whether a pension matters. It’s how everything else fits around it. Getting that mix right can make all the difference to how retirement feels, not just financially, but day to day.
When rules and allowances change over time, having clear guidance can help you understand your options. Our advisers can work with you to explore how different sources of retirement income might fit together, based on your personal circumstances. Speak to your usual Rathbones contact or complete the form below.
