Antonia Medlicott said there were five areas that people retiring needed to look at (stock image) (Image: Getty)
With data showing that over 15million people are not saving enough for retirement, and over a million pensioners not claiming benefits they are entitled to, a finance expert has warned of simple errors that people approaching their later years are making that could be costing them tens of thousands of pounds.
The Government’s Pensions Commission said its preliminary report in May 2026 that women, the self-employed, and lower and middle earners were not putting enough aside for retirement. It also warned of a potential retirement ‘cliff edge’ for up to 19million people if action was not taken.
To help, Antonia Medlicott, founder and managing director of financial education specialists Investing Insiders, has provided five of the biggest mistakes retirees make that they may not even be aware of, and explained how to fix each.
Withdrawing the full tax-free allowance needlessly
“You can withdraw up to a quarter of your private pension pot tax-free from the age of 55, rising to 57 in April 2028, but by taking the full 25 per cent tax-free immediately, this will mean a heftier tax bill throughout your whole retirement. Nearly all your private pension will be liable to tax, presuming you receive the full state pension, which next year will pass the Personal Allowance.
“Anyone with a sizable pot should only withdraw the amount they need and think of the most tax-efficient way to make it last longer, as long as circumstances allow, so that their pension lasts longer in their later years.
“Someone who has a private pension pot of £200,000 and withdraws enough to live off £20,000 per year, combined with the state pension, could save more than £8,000 in tax by phasing their drawdown in comparison to someone who withdraws the full 25 per cent tax-free at once and invests the rest at a return of 4 per cent per year. The pension pot will also last for 20 years due to the extra growth, compared with 14 years for those who withdraw fully. Someone with a £300,000 pot will save over £16,000 in tax.”
Missing out on the full state pension
“To receive the full state pension, you need to have 35 qualifying years on your National Insurance record. If you haven’t hit this amount, your pension will lose £6.89 a week per credit short, an average of £3,582.80 every 10 years per credit. If you’re approaching retirement or already retired, it is worth considering paying to make up National Insurance credits, which is £18.40 for one week’s worth (£956.80 for a full year) and makes a significant difference long-term.
“There are ways to achieve more national insurance credits for free. A government scheme called Specific Adult Childcare Credits means that if you look after a grandchild whilst a parent works, that parent can transfer a credit to you, which will increase your retirement income by more than £350 a year. Across a 25-year retirement, that’s almost £9,000. This can also be backdated to 2011.”
Failing to claim free allowances and benefits
“Across the nation, billions are being lost by pensioners due to not claiming Pension Credit. In fact, there was a 34 per cent drop in the number of Pension Credit applications sent to the Department for Work and Pensions over the past year, with an estimated 910,000 pensioner households missing out on what could be worth an estimated £4,500 to them.
“Pension credit tops up your weekly income if it is below £238 if you’re single, or if lower than £362.25 combined with a partner. It can be backdated by up to three months and is easy to apply for.
“This can also unlock further benefits, including Council Tax Reduction, help with NHS costs and energy bills, and even a free TV licence for those over the age of 75.”
Not splitting or announcing a shared pension
“If you or your partner ever need to go into a care home, the local authority will do a financial assessment to work out how much you contribute. Your home is protected under the Care Act 2014 if one of you carries on living in the house, but savings and pensions aren’t.
“If you only have one private pension between you, and it belongs to the person who’s gone into care, there is nothing to protect the partner left at home.
“However, most people are unaware of a specific rule, set out in the Care and Support (Charging and Assessment of Resources) Regulations 2014, that says if part of a pension is legally paid to a spouse or civil partner, that portion is left out of the means test entirely. Many councils apply this as a straight 50 per cent split, but it needs to be set up by someone. This is much easier to sort out before a crisis than during one.”
Leaving inheritance tax planning too late
“It is never too late to begin inheritance tax planning, but leaving it until later reduces your options and will benefit the state more than it would if you approach this early in your retirement.
“Many people delay making financial gifts to their family and decide to do so later on in their retirement. But be careful about waiting until too late, as the seven-year rule means that if you pass away in that time period, anything given away that is more than the £3,000 allowance per tax year will legally be included in your estate for inheritance tax.
“Don’t forget that from April 2027, unused pensions will be brought into your taxable estate too, so if you have a large pension, factor this into your later years, as this will only penalise you for leaving unused funds to dependants.”
