You don’t have to retire all at once. You might cut your hours, change roles or work on a few projects before you stop. This can give you more freedom, but it can also make your finances harder to manage.

Here are five things to consider as you make the change.

1. Work out whether you’ll need extra income

If you work fewer hours or take a lower-paid role, your salary may not cover the life you want. You could choose to bridge the gap with pension income, cash savings or other investments.

It’s also worth remembering that money held in a pension usually can’t be accessed until age 55. From 6 April 2028, this will rise to age 57 for most people.¹

A financial plan can show how much income you’re likely to need, what you may receive from work and whether there’s a shortfall. It can also help you decide which assets to use first.

Money taken from your pension may count towards your taxable income. Your wages, State Pension and private pensions may count too. Income from savings, investments or property may also be taxable. Looking at all your income together can help you avoid a surprise tax bill.²

You’ll also need to think about how long your money must last. Taking money from your pension could also trigger the Money Purchase Annual Allowance (MPAA). We explain this below.

The tax you pay will depend on your own circumstances. Tax rules, rates and limits can change.

2. Decide whether to keep paying into your pension

Continuing to contribute while you’re still working could give you a more comfortable retirement later. A financial planner can show how your pension may grow and whether further payments are right for you.

If you take taxable money flexibly from a defined contribution pension, you’ll usually trigger the MPAA. Taking only tax-free cash will not usually trigger it. Once it applies, the MPAA limits how much you can pay into this type of pension each tax year without a tax charge.³

For the 2026/27 tax year, the standard Annual Allowance is £60,000. A lower limit may apply if you have a high income or have taken pension money flexibly. Tax relief on your own payments has a separate earnings limit. This is usually 100% of your UK taxable earnings, or £3,600 gross if higher and you qualify. If the MPAA applies, the limit for money purchase pension savings is £10,000.⁴

HM Revenue & Customs recorded £22.4 billion in taxable flexible pension payments in 2025/26. This rose from £18.6 billion the year before. From January to March 2026, 770,000 people received these payments. The figures don’t show how many people triggered the MPAA. But they do show that flexible access is now common. It’s important to understand how it could affect future pension payments before you take taxable money.⁵

The Financial Conduct Authority also recorded 401,137 pension plans entering drawdown in the year to 31 March 2026. That was 10.5% more than the year before. The data counts pension plans, not people. Even so, it shows that more people are using flexible ways to take an income in retirement.⁶

3. Choose when to claim your State Pension

Your State Pension won’t start on its own when you reach State Pension age. You need to claim it. You can claim while you’re still working, or delay it until later.⁷

The State Pension is taxable, but tax isn’t taken off before it’s paid. HM Revenue & Customs adds it to your other taxable income to work out whether you owe Income Tax.⁸

Under the current new State Pension rules, you must usually delay your claim for at least nine weeks to get higher payments. Your weekly amount rises by 1% for every nine weeks you wait. That’s just under 5.8% for a full year. Government guidance says it takes more than 15 years to recover one year of deferred full new State Pension through the higher payments.⁹

Before you decide, think about the income you’ll give up while you wait. Also consider your health, how long you may live, your tax position and other income. Some benefits claimed by you or your partner can stop extra State Pension building up while you wait.¹⁰

4. Review how your pension and other assets are invested

Your pension is usually invested. You may also have other investments for retirement. If you plan to work longer or take income in stages, you may now be investing for a different length of time.

Many default pension funds take less risk as the retirement date on your plan gets closer. But a fund designed for taking all your money at once may not suit you if you plan to keep some invested and take an income over time.¹¹

A review can help you check whether your retirement date, level of investment risk, access to cash and scope for growth still suit your plans. Investments can rise or fall in value. Investments with less risk will usually have less scope to grow.

5. Map out your long-term income needs

Your spending is likely to change during retirement. You may spend more on travel and leisure at first. Later, health, housing or care costs may become more important.

Research by the Department for Work and Pensions in 2026 found that feeling secure in retirement depends on more than income. Savings, housing, health, relationships and surprise costs all play a part. People in the study also said their needs could change, so their plans needed regular review.¹²

Breaking retirement into stages can make your plans easier to understand. A cashflow model can show how your pension, savings and investments may change as you take an income.

The model will make assumptions about investment returns, inflation, spending and how long you may live. Its results aren’t guaranteed. Even so, it can help you compare your options, test changes and spot a future gap.

A financial plan can help you retire on your terms

These five points are a useful start, but your needs will be personal. You may also want to think about your family, later-life care, gifts, estate planning and what you want your next chapter to look like.

A tailored financial plan can bring these choices together. It can show where you are today, help you compare your options and adapt as your life changes.

If you’d like to talk about phasing into retirement, please get in touch with us.

Important information

This article is for general information only and doesn’t constitute financial advice, which should be based on your individual circumstances. So, please don’t act based only on anything you read in this article. All content is based on our understanding of current UK legislation and guidance. The information contained within this article was accurate at the date of publication and is subject to change.

Sources

1. HM Revenue & Customs: https://www.gov.uk/government/publications/increasing-normal-minimum-pension-age/increasing-normal-minimum-pension-age
2. GOV.UK: https://www.gov.uk/tax-on-pension
3. MoneyHelper: https://www.moneyhelper.org.uk/en/pensions-and-retirement/tax-and-pensions/money-purchase-annual-allowance-mpaa
4. HM Revenue & Customs: https://www.gov.uk/government/publications/rates-and-allowances-pension-schemes/pension-schemes-rates
5. HM Revenue & Customs: https://www.gov.uk/government/statistics/personal-and-stakeholder-pensions-statistics/private-pension-statistics-commentary
6. Financial Conduct Authority: https://www.fca.org.uk/data/retirement-income-market-data-2025-26
7. GOV.UK: https://www.gov.uk/new-state-pension/how-to-claim
8. HM Revenue & Customs: https://www.gov.uk/guidance/how-your-state-pension-is-taxed
9. GOV.UK: https://www.gov.uk/deferring-state-pension/if-you-reach-state-pension-age-on-or-after-6-april-2016
10. GOV.UK: https://www.gov.uk/deferring-state-pension
11. MoneyHelper: https://www.moneyhelper.org.uk/en/pensions-and-retirement/building-your-retirement-pot/pension-investment-options-an-overview
12. Department for Work and Pensions: https://www.gov.uk/government/publications/lived-experiences-of-adequacy-in-retirement-2026