The words “decumulation phase” are unlikely to summon thoughts of long relaxing holidays, more time for hobbies or simply enjoying life without the pressure of work. Yet that is exactly what it represents, the stage when you finally start to draw income from your pensions and investments and put decades of saving to work. Having built your wealth, the time to enjoy it has arrived. But doing so wisely takes planning.
Most people underestimate how much work is needed before the first retirement payment hits the bank. Forty years of saving can leave a trail of pension providers, addresses and beneficiaries that may all need updating. It’s best to get on the front foot: request statements and illustrations a year before you retire, check any defined benefit options and, if you haven’t already, set up an HMRC online account to review your state pension and any gaps in your National Insurance record.
If you are in your final years of work, it may also be worth maximising contributions - even using previous years’ allowances - to boost your pot while tax relief is still on your side. And if your investments are heavily equity-based, it might be time to dial down risk as you clarify your plans. A thorough audit of your current position is the foundation for everything that follows.
Once your information is in order, the next step is a detailed cashflow analysis. Modern software can combine your assets, liabilities, income and expenditure to project your likely income and, crucially, to distinguish sustainable from unsustainable spending levels.
One common mistake is underestimating future costs. Travel, for instance, may move from “nice-to-have” to “essential” in retirement, while healthcare expenses can rise. Reviewing your cashflow model each year helps you find your spending rhythm and adjust for changes in markets, legislation or lifestyle.
Laying these foundations may not be glamorous, but it is essential groundwork. By getting organised early and understanding what your retirement income could look like, you put yourself in control for the next stage: deciding how to draw that income and balance flexibility with security.
Decumulation can be one of the most rewarding yet complex stages of your financial journey. The right strategy can help you enjoy your retirement with confidence, balancing flexibility, security and tax efficiency along the way.
At The Penny Group, we can help you to:
- Assess your readiness for the decumulation phase
- Model your retirement income to ensure long-term sustainability
- Optimise your pension and investment withdrawals for tax efficiency
With recent and upcoming changes to pension and inheritance tax rules, now is the ideal time to review your retirement income strategy and ensure it remains fit for the future.
Remember, all decisions should be considered in the context of your own personal circumstances.
If you wish to discuss your financial position and the options available to you, please contact one of our advisers.
You can reach us at info@thepennygroup.co.uk or on 0207 061 2345.
The value of investments and any income from them can fall as well as rise and you may not get back the original amount invested.
HM Revenue and Customs practice and the law relating to taxation are complex and subject to individual circumstances and changes which cannot be foreseen.
The Penny Group Ltd is an appointed representative of The Openwork Partnership, a trading style of Openwork Limited which is authorised and regulated by the Financial Conduct Authority.
Approved by The Openwork Partnership on 13/10/2025
Managing Director at The Penny Group.
