Here we go – your retirement isn’t far away now. If you’re planning to retire early, it may be very close at hand!

With more years of work behind you than ahead of you, it’s time to look at the big picture.

Ask yourself: How much do I have in my total pension pot? How much more can I now realistically add? What do I want my retirement to look like? How flexible am I?

And if you find, after exploring all your options, that you don’t have enough funds to do everything you want to do, don’t panic. You still have options. Pensions have become more flexible in recent years – there are different ways to ensure your money lasts longer, so you can do more of the things you want to do.

For example, have you considered working part time and supplementing your reduced income with some of your pension, at least the part that is tax-free1? This is an option now with many pensions, as is altering your investment mix to maximise your potential returns over future years.

Or, if you don’t want to take such additional risks, how about delaying your retirement date to get you over the line? Remember, with much – if not all of – the mortgage potentially paid down and any kids possibly leaving home soon, you may have more money to pay into a pension, enabling you to benefit from a few more years of compound growth.

Carry-forward rules may also mean you have wiggle room to turbo-boost your pension later in life by making the most of any unclaimed tax relief from the previous three tax years and adding up to £160,000 to your pot in one go, as long as you have enough relevant earnings. 

Like any financial decision, though, you need to weigh up the pros and cons.

How risky?

If you feel you don’t have enough in your pension pot to meet your goals, you may be tempted to make riskier investments. You could move more of your pension pot into shares, for example.

However, it is usually more prudent to take fewer risks with our money the closer we each are to retirement. After all, none of us want a particularly risky investment or an 11th-hour market crash to change our plans just when we’re set to rely on our retirement savings.

So you may instead want to consider contributing more to your pension in the last few years of your working life or looking at ways you could reduce your overheads.

Becoming more conservative with age

After all, we all need a smooth glide path into retirement, as do our investments, because over time capital preservation becomes more important to us than capital growth.

Essentially, this means becoming more conservative with our investments the closer we get to – and the further we go beyond – our chosen retirement date. Typically, this means altering the mix of assets that are held with more bonds – a debt-like instrument that pays interest and is historically less volatile than shares, but also less rewarding. 

One traditional approach is to follow the adage that the percentage of bonds in your portfolio should match your age. So at the age of 50, say, 50% of your portfolio should be in bonds – preferably government bonds.

Some will prefer a more gradual glide path, while others will feel it is important to become dramatically more conservative as retirement approaches. Deciding how to manage your glide path is all part of the flexibility we find in today’s pensions.

Our own preferred approach, based on years of research2 and baked into our Target Retirement Funds, is illustrated below.

Glide paths for Vanguard’s Target Retirement Funds

Notes: Figure assumes that a particular fund was selected based on a projected target retirement age of 68. Source: Vanguard.

Changes of heart are possible

What’s more, don’t underestimate the potential for you to change your mind, given the increasingly blurred lines between work and retirement as people seek more from life and look to take advantage of the pension freedoms available to them.

The pandemic upended a lot of the certainties many of us had about retiring. In some cases, people who experienced remote or flexible working have realised they may be able to work for longer – doing what they love, saving more and slowing down gradually.

Still others got a taste of an early retirement and wanted more of it. Government data shows 13% of UK workers have changed their retirement plans over the past two years, with 5% planning to retire earlier and 8% later3.

And that’s not the end of it, because weaker investment returns and the growing threat of recession are now giving others reason to pause, or even rewind, their retirement plans. It’s an emerging trend observed by some of our US experts who note how the ‘great retirement’ of the pandemic might yet morph into a ‘great sabbatical’ as people reassess whether they have saved enough to live as they would like for as long as required4.

Be strategic

Those given a taste of life beyond work can now retire and start drawing from their self-invested personal pensions (SIPPs) from as early on as aged 555. Many workplace pension schemes are also accommodating early retirees6. Plus, the first 25% can be withdrawn – at your own pace – as a tax-free cash lump-sum, to do with as you please.

Do it strategically and you may also be able to continue maximising your savings potential, as I explain in another recent article: ‘Saving strategies for the semi-retired and almost retired’.

Just remember to think it through. After all, your retirement could still last you several more decades7.

It’s great that we all have more freedom than we once did when it comes to our pension funds. But with that freedom comes greater responsibility. So, if need be, talk to a financial adviser.


1 The first 25% of any defined contribution pension, including SIPP, can be accessed as a tax-free cash lump sum – whether all at once or bit by bit.

2 Daga, Ankul, CFA; Todd Schlanger CFA; Scott Donaldson CFP, CFA; Peter Westaway PhD, ‘Vanguard’s approach to target retirement funds in the UK’, Vanguard Research, February 2016.

3 Living longer: older workers during the coronavirus (Covid-19) pandemic, May 2021, Office of National Statistics.

4 Clarke, Andrew S. CFA, Fu Tan, Ph.D, Adam J. Schickling, CFA, The Great Retirement? Or the Great Sabbatical, Vanguard Research, June 2022

5 This rises to 57 in April 2028.

6 This applies to defined-contribution pension schemes only. Defined-benefit schemes, which pay a guaranteed income and are becoming rarer, may have different rules. If in doubt, speak to a financial adviser or contact your pension provider.

7 Life expectancy at birth in the UK in 2017 to 2019 was 79.4 years for males and 83.1 years for females. But many people live longer than this. To see what it might be for people in your age group, use the Office of National Statistics’ life expectancy calculator

Investment risk information

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If you are not sure of the suitability or appropriateness of any investment, product or service you should consult an authorised financial adviser. Please note this may incur a charge.

Any tax reliefs referred to in this article are those available under current legislation, which may change, and their availability and value will depend on your individual circumstances. If you have questions relating to your specific tax situation, please contact your tax adviser.

Important information

This article is designed for use by, and is directed only at, persons resident in the UK.

For further information on the fund's investment policies and risks, please refer to the prospectus of the UCITS and to the KIID before making any final investment decisions. The KIID for this fund is available, alongside the prospectus via Vanguard’s website

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