Planning for a Phased Retirement: Is It Right for You?
Retirement is changing.
For many people, retirement is no longer a single date in the diary. It is not always a case of working one day and stopping completely the next.
For business owners, barristers, entertainers, law firm partners and other professionals, retirement may happen gradually. Work reduces, income changes, and the financial plan needs to adapt.
This follows naturally from our previous blogs on pension drawdown and income sustainability. If retirement income is flexible, then retirement itself can be flexible too.
As people live longer, many also want to retain the purpose, structure and mental stimulation that work can provide. This is where the idea of a retirement runway becomes important.
Instead of thinking of retirement as a cliff edge, phased retirement lets you step back gradually and build a plan for the life you want.
What is phased retirement?
Phased retirement is when you gradually reduce your work rather than stopping completely on a fixed date.
This might include:
Reducing working hours.
Moving from full-time work to consultancy.
Taking income from pensions gradually.
Using savings, ISAs, pensions and business proceeds together.
Delaying full retirement.
Working fewer days over several years.
MoneyHelper explains that a phased or partial drawdown allows someone to gradually withdraw pension funds, rather than withdrawing the whole pension in one go.
A simple example might be someone who sets up a consultancy at age 50 and has a potential retirement age of 67.
In the early years, they may work five or six days a week. Over time, they may reduce this to three or four days, and then gradually move to one or two days by the time they reach 67.
This type of retirement journey is becoming more common.
Why phased retirement is becoming more common
Retirement patterns have changed.
In the past, many people worked until a set retirement age and then stopped. Often, they had a guaranteed pension income and a shorter retirement period.
Today, retirement can last 20 years or more. For some, it may last much longer.
This creates both opportunities and challenges.
For people in good health, the idea of stopping work completely may not be attractive. Work can provide purpose, social connection, structure and mental stimulation. Many people want to keep some of those benefits, while also creating more time for family, travel, hobbies and personal priorities.
Phased retirement is becoming more common because:
Professionals are stepping back gradually.
Business owners may exit over several years.
Couples may retire at different times.
Income needs may change over time.
Tax needs to be managed carefully.
People want time to adjust emotionally.
Retirement is no longer one fixed event.
The benefits of phased retirement
Ask people whether they would like to stop work tomorrow, and many will say yes at first.
But the reality can be more complicated.
Retirement is a major life change. For people whose identity, routine and purpose have been closely linked to their work, stopping completely can be difficult. This is particularly true for business owners and professionals who have spent decades building a career, practice or business.
Phased retirement can help by giving people time to adjust.
The potential benefits include:
More flexibility.
Reduced pressure on pension assets.
Continued earned income.
More time to adjust emotionally.
Potential tax planning opportunities.
The ability to test retirement before fully committing.
More control over when and how income is taken.
A smoother transition from work to retirement.
Phased retirement can also reduce the need to draw heavily from pensions and investments in the early years. This may help sustain income in the long term.
The risks of phased retirement
Phased retirement can work well, but it still needs careful planning.
If it is not managed properly, it can create problems later.
For example, someone may reduce their working days while continuing to spend at the same level. They may start drawing from pensions too early or take too much income before the plan is ready. They may also underestimate how quickly income from work could fall.
Some of the key risks include:
Unpredictable income.
Drawing pensions too early.
Triggering tax issues.
Underestimating spending.
Not coordinating pension, ISA and cash withdrawals.
Investment risk if the plan depends too heavily on growth.
Work ending earlier than expected.
Failing to review the plan regularly.
The key point is that phased retirement should still be built around a clear financial plan.
It should not simply be a hope that the numbers will work.
How phased pension drawdown can work
Phased retirement and pension drawdown can work together.
If someone is still earning, they may not need to take full pension income immediately. Instead, they may use pensions, ISAs, cash savings and other assets to top up reduced earnings.
For example, pension tax-free cash could be used to supplement income. Pension income is taxable, but unlike employment or self-employed earnings, pension income is not subject to National Insurance.
ISAs can also provide tax-free income, which may be useful when managing taxable income carefully.
The point is not that everything should come from one place. The point is that phased retirement is about understanding all the moving parts and how they work together.
This may include:
Earned income.
Pension income.
Pension tax-free cash.
ISA withdrawals.
Cash savings.
Investment income.
Business sale proceeds.
Property income.
Reduced expenditure.
It is also important to remember that spending may change. For example, if the mortgage is cleared, the required income level may decrease. This could mean fewer working hours are needed without placing extra pressure on pensions and investments.
Phased retirement for business owners
Phased retirement can be particularly relevant for business owners.
Many business owners do not simply stop. They may sell the business, pass it to the management team, hand it to family members or remain involved as a consultant.
This creates several planning points, including:
Selling the business over time.
Consultancy income after sale.
Pension contributions before exit.
Business sale proceeds.
Capital gains tax planning.
Protecting family wealth.
Managing income after the business sale.
Planning for life after ownership.
For business owners, retirement planning is often closely linked to succession, tax and estate planning.
The challenge is not just about extracting value from the business. It is about turning that value into long-term financial security.
Phased retirement for barristers, entertainers and law firm partners
Phased retirement can also be relevant for barristers, entertainers and partners of law firms.
Income may be variable. Work patterns may be irregular. Taxable profits may fluctuate. The decision to reduce work may be gradual rather than on a fixed date.
Important planning points include:
Variable income.
Taxable profits.
Irregular work patterns.
Later career choices.
Partnership income.
Consultancy or project work.
Building flexibility into the income plan.
Coordinating pension and non-pension assets.
For these clients, the retirement plan needs to be flexible enough to reflect changing income and changing priorities.
Questions to ask before choosing phased retirement
Before choosing phased retirement, it is worth asking some important questions:
How much income do I need each year?
How long do I want to keep working?
What happens if work stops earlier than expected?
Which assets should I use first?
How much investment risk can I take?
What income is essential?
What income is discretionary?
How will tax affect the plan?
What do I want to leave behind?
What does retirement actually look like for me?
The final question may be the most important.
At Ifamax, we often say that financial planning starts with the plan. But the plan starts with understanding what you want life to look like.
How a financial planner can help
It is worth repeating the point we made in our previous blogs: retirement planning should not be driven solely by investments.
Investments matter, but they should sit behind the plan.
Ifamax has been around for more than 20 years, and our business has always centred around financial planning. We believe the starting point is understanding the individual, their goals, their concerns and the outcomes they want.
We have many clients now in retirement. Over the years, we have worked with business owners, barristers, entertainers, law firm partners and other professionals. We understand that retirement is not always straightforward and that stepping back gradually can bring both opportunities and potential pitfalls.
A financial planner can help you:
Understand whether phased retirement is realistic.
Model different income scenarios.
Coordinate pensions, ISAs, cash and investments.
Plan tax-efficient withdrawals.
Review investment risk.
Consider business sale proceeds.
Build in flexibility.
Review the plan as life changes.
Phased retirement can be a positive and practical option, but it works best when carefully planned.
Frequently Asked Questions
What is phased retirement?
Phased retirement is when you gradually reduce your work rather than stopping completely on a fixed date. This might involve working fewer days, moving into consultancy, gradually taking pension income, or using different assets to support income.
Can I take my pension while still working?
Yes, in many cases, you can take pension benefits while continuing to work. However, this can have tax implications and may affect how much you can continue contributing to pensions, so advice is important.
Is phased retirement tax-efficient?
It can be. Phased retirement may allow you to manage income from work, pensions, ISAs and other assets in a more tax-efficient way. The right approach depends on your income, assets and personal circumstances.
What is phased pension drawdown?
Phased pension drawdown allows you to move pension money into drawdown gradually over time, rather than moving the whole pension into drawdown in one go. This can help with income planning and tax planning.
Does phased retirement reduce the risk of running out of money?
It can help because continued earned income may reduce the pressure on pension and investment assets in the early years of retirement. However, it does not remove risk. The plan still needs to be reviewed regularly.
Should business owners plan retirement differently?
Yes. Business owners often need to consider succession, business sale proceeds, consultancy income, pension contributions, capital gains tax and family wealth planning. Retirement planning for business owners is often more complex than simply choosing when to stop working.
Thinking about stepping back gradually?
If retirement is not a single date for you, Ifamax Wealth Management can help you build a phased retirement plan that brings together pensions, investments, tax and long-term wealth management.
Our Bristol-based financial planners help clients understand how to grow, protect and pass on wealth while planning for the retirement they want.
Related Links
The Twelve Steps to Retirement
How Much Do I Need for a Comfortable Retirement in the UK?
Retirement Planning in the UK: How to Build a Sustainable Income for Life
When Can I Afford to Retire? How We Help You Find Your Freedom Date
Important note
This article is distributed for educational purposes only and should not be considered investment advice or an offer of any security for sale. This article contains the opinions of the author but not necessarily the Firm and does not represent a recommendation of any particular security, strategy, or investment product. Reference to specific products is made only to help make educational points and does not constitute any form or recommendation or advice. Information contained herein has been obtained from sources believed to be reliable but is not guaranteed.
Article Written: July 2026, Tax Rates and Allowances May Change In The Future.