This podcast isn’t personal advice. If you’re not sure what’s right for you, seek advice. Tax rules can change and benefits depend on personal circumstances.
This podcast isn’t personal advice. If you’re not sure what’s right for you, seek advice. Investments rise and fall in value, so investors could make a loss. Tax rules can change and any benefits depend on your personal circumstances.
Full podcast episode transcript
[0:08] Susannah Streeter: Hello and welcome to the Switch Your Money On podcast with me, Susannah Streeter – Head of Money and Markets here at Hargreaves Lansdown.
[0:14] Sarah Coles: And me, Sarah Coles – Head of Personal Finance.
[0:16] Susannah Streeter: So, Sarah, we’re doing lots of horizon scanning this time around – and not just because it’s that long-awaited time of the year when the clocks are soon set to spring forward and we see the sun linger a little longer in the sky.
[0:30] Sarah Coles: Yes – although I love the arrival of springtime too – and the longer days – so I don’t try to go running in the dark and end up falling in loads of potholes!
But, for now, we’re focusing on horizons which seem far away – or scarily near, depending on how old you are.
[0:43] Susannah Streeter: Yes – we’re focusing on retirement and asking how you can avoid the potholes in that path too.
Plus, we’re going to scan the horizon when it comes to what’s happening with global trade and how it’s going to affect the UK economy.
[0:56] Sarah Coles: Yes – so we’re actually 10 years down the track from major pension reforms – which was known as ‘Freedom and Choice’ – and ushered in a host of changes – including the fact you no longer have to buy an annuity to turn your pension pot into an income.
So, we’ll speak to Helen Morrissey – our Head of Retirement Analysis – about the questions we need to consider now, as we work our way towards retirement.
[1:19] Susannah Streeter: Unusually, we’ll also be talking to our boss, Danny Cox – Head of Communications here at HL (and a former Financial Planner) – who is on the cusp of early retirement, and can tell us more about how he got there.
But first, we should start by looking into the slightly nearer future.
If talking about growth could power the economy, we’d be accelerating super-fast right now – but, despite all the talk and the hopes of the UK Government, growth is proving very elusive right now.
Instead of turning a corner away from stagnation, the economy went into reverse in
January, shrinking by 0.1% - which may not sound much, but it’s still a bitter blow for the Chancellor, Rachel Reeves, given that it reduces the chances of a significant increase in revenues raised through taxes to help her balance the books.
[2:12] Sarah Coles: Plus, of course, Trump’s tariff policies are another thorn in the Government’s side, aren’t they?
[2:17] Susannah Streeter: Yes – the Organisation for Economic Cooperation and Development (OECD) has cut the UK growth forecast for 2025 and 2026, as it downgraded the prospects for the global economy overall because of worries over the mounting trade war.
In its latest forecast, the OECD reduced predictions for UK growth to 1.4% in 2025, from its previous forecast of 1.7%, and to 1.2% in 2026, down from 1.3%.
It sounds bleak but, actually, it’s not quite as bad as the Bank of England’s own growth forecasts – last month, it cut its expectations of growth to 0.75% for this year.
[3:01] Sarah Coles: And, of course, all this has implications for the Government – and not just the Spring Statement, which has just landed.
[3:06] Susannah Streeter: Yes – cutting the costs of regulation for businesses... also set to be central to government plans to try and kickstart the economy.
Keir Starmer has already outlined plans to scrap some quangos – quasi-autonomous non-governmental organisations (QUANGO) – and pledged to cut the cost of regulation for businesses. The plans are also expected to include easing some environmental measures to help major infrastructure projects be completed more quickly.
The longer-term implications of this are far from clear – and, if there is a resulting bump to growth, it’ll take time. And, in the immediate future – given the trade headwinds – a substantial uptick in growth is set to be hidden away for longer.
So, the Bank of England is expected to embark on multiple interest rate cuts from around the middle of the year onwards, with the chances of a cut in May around 50/50. This should provide some relief for consumers, homeowners, and businesses who’ve had to cope with high borrowing costs for so long.
[4:14] Sarah Coles: It could take some time for all of this to power the growth the Government is looking for, so they’re working with some pretty long-time horizons.
But then again, aren’t we all? – because while we’re getting on with life as usual, we all need to be thinking about our plans for retirement. So, this feels like a good time to bring in Helen Morrissey – our Head of Retirement Analysis – to talk a little about how people can prepare for retirement.
So, we do a piece of research called the HL Savings & Resilience Barometer, and one of the things it looks at is how many people are on track for a moderate retirement income. That’s nothing flash, it’s just things like a two-week holiday in Europe and owning a second-hand car – and it found, back in January, that just 36% of people are on track. That’s almost two-thirds of people falling short.
[4:54] Susannah Streeter: What other research is out there, Helen?
[4:58] Helen Morrissey: We also do a separate piece of research with Opinium, gauging how around 1,500 people feel about their retirement, and some of those findings from September 2024 are just as tough. Fewer than half knew how much money they would need in retirement – which makes it incredibly difficult to know if they’re putting enough money away. So, it’s hardly surprising that fewer than half were confident they would ever be able to afford to retire.
So, there are a number of questions that people need to ask themselves, and some checks to make sure that you know what you want from this period of life.
[5:34] Sarah Coles: What are some of the key questions that people need to ask themselves?
[5:37] Helen Morrissey: The important ones centre around, ‘Where d’you want to live?’ ‘D’you want to stay put, downsize, or perhaps even move abroad?’ Your answer to that will have big implications for how much you need to have saved. You also need to think about what age you actually want to retire and what that looks like. D’you want to retire completely? D’you want to phase into retirement over a period of years by reducing your working week, or d’you want to go elsewhere and work part-time?
Different people will have very different ideas. Let’s not forget that you may also find that you need to retire earlier than you first thought. This could be due to something like redundancy or ill health. Making sure you’ve got enough set aside to help you bridge that gap to retirement is important.
[6:22] Sarah Coles: That’s really interesting. I think that, when people think about retirement from a distance, they tend to think of it as a big block of time – but, when you get closer, you realise there’s a whole series of phases. As you say, you might want to work part-time for a while, then you might want to travel, and then you might want to focus on supporting family for a few years. You need to think about your retirement income and how it can support those phases.
[6:41] Helen Morrissey: Absolutely. Wherever possible, you need to have the flexibility in your plan to help you meet these needs. You need to think about what your day-to-day expenses are and how these can be met. So, for instance, you could use a defined benefit pension, or an annuity, to secure the day-to-day stuff – and then leave the rest in income drawdown or even a stocks and shares ISA, where it has the ability to grow and help you fund things like travelling, supporting family etc. If you continue to work into retirement, then the wages you earn will also give an extra boost to your lifestyle.
[7:14] Sarah Coles: One consideration when you leave work is that you lose part of your broader benefits package that you might want to replace.
[7:20] Helen Morrissey: Agreed. If, for example, you’re paying a mortgage or have people relying on your income, you might have relief on the death-in-service cover offered by your employer. Once you’ve retired, you could consider life insurance.
Likewise, you might want to think about things like health insurance. They might be more expensive when you take stand-alone cover because the insurer will weigh up how much of a risk you pose – and, as you’re older, they might charge more. But, if it’s something that has been key to your peace of mind, you might want to consider it. You can talk to your current insurer about what they might offer, but it’s also important to shop around.
It’s also not just the financial benefits. When you retire, you also lose a whole bunch of things that are part and parcel of working for a lot of people – like status, friends, or even a sense of purpose. Don’t overlook how important it is to plan for getting a balance of these things in your life in retirement too.
[8:18] Susannah Streeter: And, when you think of retirement, pensions are the first thing that spring to mind, but what are the other parts of the retirement picture you need to consider?
[8:32] Helen Morrissey: You need savings – so, in retirement, advisers tend to recommend having 1-3 years’ worth of cash savings in an easy access account or a cash ISA for emergencies.
This is much more than we need while we’re working because, when you’re on a lower fixed income, it can be difficult to rebuild those emergency savings as quickly as when you’re working. You need to have enough cash to cover you if you’re hit by a run of bad luck before you have time to get your savings back on track.
It’s also essential for anyone taking any income from drawdown. At times when the stock market isn’t delivering the growth or income you expect, you can supplement your income with your savings rather than eating into more of your pension than you had planned. That way, when the market recovers, you can top those savings back up. It avoids the damage done by withdrawing from your pension when the markets are down.
It also makes sense to hold stocks and shares ISAs alongside your pension for added flexibility. The income from ISAs is tax-free, so you could plan to use it for one-off costs or times when you know your income needs will be higher. If you plan carefully, you can use it to take a tax-free income in retirement that ensures you can stay below a specific tax threshold.
[9:46] Sarah Coles: So, there’s an awful lot to ask yourself when you’re thinking about retirement, and those questions become even more pressing as retirement approaches. Are there any other tips you’d give, Helen?
[9:55] Helen Morrissey: Yes – as we’ve said, retirement looks different to everyone, and knowing what you want will really help you in working out how much you need to have saved. There’s all kinds of rules of thumb – for instance, saving a certain multiple of your income by the time you retire. These are useful, but not foolproof.
The key is to engage with your pensions, know how much you have saved, and then you can use tools like online pension calculators to tell you roughly what you’re on track for. You can even model the impact of boosting your contributions. Checking in with your pensions like this gives you confidence of knowing you are on track or giving you enough time to put a plan in place if you aren’t.
[10:38] Susannah Streeter: Thank you, Helen – really fascinating stuff.
Joining us now is our colleague, Danny Cox – who is retiring early, which is gonna be a great loss to the business. I want to dig into the reasons why you decided to take the plunge now and retire early.
What prompted this decision?
[11:07] Danny Cox: The key issue here is a number of different factors, so it’s moons aligning. Yes, it’s I’m lucky enough to be able to afford to retire now, but it’s what’s happening in my family situation. Both my children and also my mother – it’s also, ‘What am I gonna do with my time once I have all this excess free time?’ So, there’s a number of different factors that have come into play, and it just feels like the right time now.
After all, I have been working 42 years, so I feel it’s time for a break.
[11:37] Susannah Streeter: Time for a break indeed – but there’s quite a long horizon ahead of you, and does that worry you at all? What is your biggest money-worry when it comes to retirement?
[11:52] Danny Cox: This applied particularly when I was financially advising... the biggest concern that people had is, ‘Are you gonna run out of money?’ And so, I’ve looked at my expenditure – and, actually, my expenditure is not really changing very much. I’m staying in the same house – so my Council Tax is broadly the same, my electricity is gonna be the same, the amount I use the car is gonna be the same, the amount I spend on food is gonna be the same. With my expenditure staying the same, it’s very straightforward for me to look at how I can produce sufficient income to meet that expenditure and then allow for some contingencies and some surplus – the odd extra holiday and things of that nature.
And so, the way that I’ve been looking at this... if I don’t spend more than 3% of the value of my combined ISAs, pensions, and portfolio in any one given year – so that’s for every £100,000-worth of value I have, I don’t spend more than £3,000... the probability is, over time – although not guaranteed – is that my capital is gonna gradually grow and the income is gonna gradually grow as well – and I’ve also allowed for some contingencies. For example, I’ve earmarked some money just in case I need care – or my wife needs care.
[13:01] Sarah Coles: So, if someone else was going through this process, do they need to do that sort of maths, or is there a magical number they can aim for that’s just perfect for early retirement?
[13:09] Danny Cox: I think it’s a really interesting question. I remember, when I spoke to my mum and dad when they retired about 20 years ago, and I asked my mum how much she thought she would need to live on – and she immediately said, ‘About £20,000 a year.’ And, when I asked my dad the question in a different room... as a Scientist, he went away for a weekend – and he went through all of his previous bank statements – allowing for special birthdays and all sorts of other different gifts that he’d made – and he came back and said, ‘It’s exactly £20,400.’
So, it’s, ‘How d’you get to that number?’ I think the question for me here – that’s really important – is it’s not a case of when you’re going to retire, it’s where you’re going to retire. For me, I’ve got no desires to move abroad or to change my house. From that perspective, my expenditure is gonna stay pretty similar, and that allows you to plan ahead quite naturally.
If we think about it, the way that people spend doesn’t really change when they move from one job to another – or from one situation to another – for example, going into retirement. My parents’ spending habits do really change – you’re either a spender of a saver.
[14:18] Susannah Streeter: I think that is part of the picture – because, if you’re not going to work every day, what will you be doing? Will your hobbies actually end up costing you more money to fill the time that you have?
That’s part of it – what are you going to be doing with your days?!
[14:34] Danny Cox: It’s a really good point. I’ve got young children, so I’ve got two school runs to be doing every day – apart from anything else – which I’m really looking forward to – and I spend a lot of time cycling. My mother is elderly as well, so I’ll be spending some more time with her – also looking at some charity work.
I’m not planning to go off travelling round the world – I’m not planning to go off and start a business – which, of course, you would need to factor into your retirement-income calculations. My life is gonna stay very similar to as it is now from an expenditure perspective.
[15:07] Sarah Coles: So, you’ve obviously done the maths. If someone doesn’t go through this process – doesn’t work out what they need – and do the maths – presumably, there’s a risk then in terms of running out of money.
[15:17] Danny Cox: Very much so – and, particularly, if you start to draw down too heavily on your investments or your pensions. There’s a general rule of thumb that you should try and avoid drawing more than 4% a year in order to be able to sustain the value of your capital. So, the capital grows every year – or grows over the years – of course, there will be ups and downs along the way.
I’m looking at around about 3% ‘cause I’m a bit more conservative – I’m quite a risk-averse person. But, if you started drawing much more – or you needed much more income – you’re probably going to start spending capital, and the more capital you spend, the less income you’re gonna have later in life.
[15:52] Susannah Streeter: Because, of course, we do have the opportunity to take out a lump sum – has that been factored into your plans?
[16:02] Danny Cox: Absolutely. I’m still working for a little bit more into the new tax year – so, just from a tax perspective, I don’t plan to take any money out of my pension for a while because I will have earnings in the new tax year – but, when I do take out my tax-free cash sum... because I’ve already got some cash accumulated, I’m going to be reinvesting that straightway. As and when I draw my pension, I will be taking tax-free cash from that.
[16:27] Susannah Streeter: Obviously, everybody’s circumstances are different, but there are other tax implications that you’ve got to consider when you are drawing from your pension, haven’t you?
[16:36] Danny Cox: Yes, very much so. Trying to keep my income below the higher-rate tax threshold is one of the considerations. My wife is still working, so there’s elements that I can spread income between the two of us – to be able to maximise tax benefits. And it’s really important to continue to use things like ISAs and other tax-free investment wrappers.
[16:59] Sarah Coles: When people get into retirement, one of the things that can happen is you get very clinging onto cash – there’s a fear that you hold onto cash. I know you’ve advised for a lot of years – is that something you came across?
[17:12] Danny Cox: I definitely came across it – and I come across it now. Because I have that fear myself, I’m generally quite a risk-averse person – my wife is even more risk-averse than me – so we do have a healthy cash balance within our portfolio – and I definitely recognise that, over the long-term, that’s not going to keep pace with inflation – but it’s also really important to hold enough cash that you feel really comfortable. And again, just coming back to when I was advising... is that people would often hold anything up to 20% of their portfolio in cash, just because they felt more comfort with that. If you feel comfortable with that – and it doesn’t affect your long-term plans – then that’s a price worth paying.
[17:47] Sarah Coles: I think that was something in lockdowns – we all held slightly more cash, and we suddenly felt slightly more comfortable. When you have to wean yourself off, and hold the right amount of cash, rather than just holding it all together!
[17:58] Danny Cox: And, of course, you need to think about what your timeline is – you’re talking about long-term plans.
My income drawdown portfolio is a 30-year strategy. I’ve been lucky enough to have been saving into pensions for 40 years – so my whole pension-timeline could be anything up to 70 or 80 years’ long. So, taking that long-term view, is really important.
[18:21] Susannah Streeter: People tend to regret leaving all of these decisions and this planning too late. What would your advice be to somebody who’s thinking, ‘Gosh, I’m not as organised as Danny – how do I get there?!’
[18:35] Danny Cox: I’ve been very lucky that the organisation has been almost thrust upon me, in that this is what I’ve done for a living for many years. But, when I started saving into a pension at age 18, I didn’t actually realise I was doing it – because I went straight into a retail supermarket and I was straight into their pension scheme – and I’ve pretty much been in a pension scheme ever since. Auto-enrolment has been brilliant for pension-saving, generally, because it means people have not had to make that decision.
I can also remember, for years and years, looking at the value of my pension and thinking, ‘That’s really dismal – that’s not going up very fast – and I’m not putting very much in ‘cause I can’t afford to.’ Life, buying a house gets in the way. But I’ve found – as I’ve got towards 10 years before retirement – suddenly, the value starts to creep up, and you start thinking to yourself, ‘Actually, this is starting to progress nicely.’ I’m so glad I’ve put in even those very small contributions years ago... it really makes a big difference.
So, it’s really important to start – if you haven’t started already. However small, just get it going and add more as you can.
[19:42] Sarah Coles: And I suppose, now we’ve got auto-enrolment, people do save by accident without really thinking about it – but there comes a point in peoples’ lives where they actually think, ‘Right, where am I – what do I need to do?’ It’s partly the accumulation – is there anything else that tends to trick people into thinking properly about their retirement – and what was it for you?
[20:03] Danny Cox: I think a lot of people see the age of 50 as being a pivotal point, where they suddenly realise, ‘Actually, retirement is not that long away.’ For me, it wasn’t age 50 – it was round about age 55 – but, by that time, I was already in the process of saving as much as I could into pension and ISAs.
Whatever the trigger is, you’ve got to remember that the more you spend today, the less you’ll have tomorrow – and vice versa. So, if you can afford to put a bit more away today, it then does give you a few more choices when you’re ahead of state retirement age – as I am – to be able to retire early.
[20:40] Sarah Coles: Obviously, you’ve got quite a lot of other money – being ex-Financial Planner – but, in terms of the wider considerations, have you had to think about who you are once you’ve stopped being our boss?
[20:51] Danny Cox: Massively! [Laughs] This has been a two-year process of thinking about it – going through all the decisions – and you end up compartmentalising all the different bits of your life, and thinking, ‘How can I negate those?’ – being a boss – and, ‘Which ones do I actually want to replace?’ Things like the social side of work – and the money side too.
If you take all of those compartments and try and replace them in one, that just looks like another job – that doesn’t look like retirement. So, I’ve thought about, ‘These are the ways I’m gonna be able to replace the social side.’ I know how I’m gonna replace my income side – or generate the income that I need – and the family side. So, you can compartmentalise each bit – but it’s quite an interesting process to go through – and quite scary at times.
[21:41] Susannah Streeter: You say that you’re risk-averse, but is there a small part of you that thinks, ‘This is the start of an adventure?’ D’you want to do anything which is a bit more out of the box?
[21:51] Danny Cox: [Laughs] For me, yes – for other people, no. Actually, doing the school run every day – which I’ve never done before – I’ve never been able to have the time off work to be able to do that. I think that’s gonna be a great adventure!
[22:12] Susannah Streeter: You are gonna be the boss of the PTA in no time!
[22:15] Danny Cox: I’ve already been asked about governorship of the school, so there’s that kind of thing to get involved with. It’s about thinking about what you really enjoy about work and channelling that into a different direction.
There’s a charity I work with – I’m able to use that as a way of channelling my enthusiasm and my growth mindset to try and grow that charity and grow that impact. So, navigating those little component parts and putting them in the right direction.
[22:43] Sarah Coles: Next time we speak, I’m sure you’ll have a plan to cycle round the world – and you’ll have another eight bikes! [Laughs]
[22:52] Danny Cox: I haven’t factored new bikes into my financial plan, but I probably should do!
That’s another thing – you think about your New Year’s resolutions, which are... I’m going to spend more time in the gym – I’m gonna spend more time with the family. So, I now have the opportunity to have a New Year’s resolution almost every day – or that kind of plan.
[23:10] Susannah Streeter: We are gonna be very sad to see you cycling off into the distance. Thank you so much – it’s been super-helpful.
[23:17] Danny Cox: No problem.
[23:18] Susannah Streeter: You’re listening to Switch Your Money On from Hargreaves Lansdown, and we should add that money in a pension is not usually accessible until you’re 55 (and that’s rising to 57 from 2028).
And, if you’re over 50, the government’s free and impartial Pension Wise service can help you, if needed. You should ask for advice if you’re unsure about your retirement options.
[23:38] Sarah Coles: And, unlike the security offered by cash, investments and any income they produce can rise and fall in value, so you could get back less than you invest, and past performance is not a guide to the future. Tax rules can change, and benefits depend on individual circumstances.
[23:51] Susannah Streeter: Now, before we go, there is time for a quick stat of the week – and, for that, we’ll stick with retirement – specifically Elton John’s retirement from touring.
In 1977, he announced he wouldn’t be touring again, but how many years did it take before his final farewell tour ended?
[24:14] Sarah Coles: I know I heard about it relatively recently, so I’ll say 40 years.
[24:20] Susannah Streeter: No, it was even longer – in fact, he finished it in the summer of 2023 – so that’s 46 years! Impressively, even though he retired from touring at the age of 76, he admitted he’d be tempted back for the odd show in the future.
[24:53] Sarah Coles: 76 is impressive. I’m not sure I’ll still be working away at the podcasting grindstone at that age!
[25:00] Susannah Streeter: You never know – do podcasters ever really stop?!
That’s all from us – but, before we go, we do need to remind you that this was recorded on 17th and 24th March 2025 and all information was correct at the time of recording.
[25:16] Sarah Coles: Nothing in this podcast is personal advice – you should seek advice if you’re not sure what’s right for you.
[25:19] Susannah Streeter: Yes – this is not advice or a recommendation to buy, sell, or hold any investment. No view is given on the present or future value or price of any investment, and investors should form their own view on any proposed investment.
[25:30] Sarah Coles: So, all that’s left is for us to thank our guests: Helen, Danny, and our Producer, Elizabeth Hotson.
[25:34] Susannah Streeter: Thank you very much for listening. We’ll be back again soon – goodbye!