Navigating Pensions & Retirement Planning in Scotland

Retirement is a significant milestone in life, yet many people do not start thinking about retirement early enough, meaning they sometimes end up missing out on opportunities throughout their younger years that could have set them up for a more financially stable retirement. Alongside providing accountancy services, we also work with Verus Wealth to provide additional support to our clients in preparing for their golden years. Verus Wealth is an award-winning and independent financial planning firm (as well as the first firm in the local region to gain the Chartered Insurance Institute’s Chartered Financial Planner status, which is the highest standard recognised across the UK). 

In Scotland, there are a range of pension and retirement options available and in this article, we aim to shed light on the different types of pensions available, how to select the right pension type for your lifestyle needs, and the tax implications associated with retirement planning. 


What are pensions and how do they work?

A pension is a retirement savings plan where individuals and/or their employers contribute (tax-exempt) values of money over time, which is then invested to generate returns. Depending on the type of pension plan you have, investments may be fully or partially managed by the pension provider (investments can include stocks, bonds, and more and will usually carry a low to medium risk to ensure positive returns over time).

Your pension “pot” will usually be set up when you join a new employer, however not all workplaces will use the same pension provider, so it’s important to ensure you consolidate your pension pots so you can have full visibility of your pension’s value. Upon retirement, these contributions will provide regular income to help you maintain financial stability during your non-working years. This pension benefit (also known as pension income) is taxable when received and will be taxed in line with the latest rates for values above your personal allowance, which varies year-on-year). 


Different types of pensions in Scotland:

There are a range of different types of pensions to choose from and varying benefits associated with each choice depending on your lifestyle and employment. These include:

See our recent blog post, to learn more about each type in more detail and get in touch to book a consultation with our partners, Verus Wealth, and discuss the best options for you.


Choosing the right type of pension:

Your “ideal” type of pension may change over time as it depends on factors such as your age and income, which is why making your selection requires careful assessment of your personal circumstances (especially if they change), financial goals (short and long-term), and risk tolerance (in relation to the investment side of things). 


Some examples to consider:

(Please note these are examples only and may not be suitable for everyone – we recommend speaking with Verus Wealth prior to making any changes to your pension.)

  • In your younger years, you may wish to choose a pension that offers medium to higher-risk investments as you will have more time to recover any losses. However, in your later years, your low and medium-risk investments may be more profitable as your pension pot will be bigger. 


  • Earlier in life, you may wish to make smaller pension contributions as this will ensure you have more money to save on larger purchases such as a deposit on a house. However, later in life and/or as your income increases and you have more disposable income, you may wish to contribute more to your pension which will provide you with a larger pension pot in retirement. 


  • It’s also important to consider your retirement goals. Whether you wish to travel, invest in property, or indulge in new hobbies, factoring in the costs associated with these activities will have an impact on the size of the pension pot you’re working towards. 


Tax implications of retirement planning and pensions:

Throughout the lifetime of your pension – from contributions to payouts – you will be subject to varying tax amounts. For example:

  • Prior to reaching retirement, you will be eligible for pension tax relief on your regular pension contributions. The amount will be deducted from the pre-tax amount of your wages, and tax will be applied to the remainder of your income each month (this is because you will pay income tax on pension benefits, so this way you will not be taxed twice). This pension tax relief means you can grow your pension fund quicker and will be more profitable in the long term. 


  • Income tax will be the amount you pay based on your total income – this will include your pension income (when you begin collecting the payments), as well as any other forms of income such as part-time or full-time employment, income from rent, etc.




What are the biggest mistakes people make when planning for retirement?

  • Procrastination and delaying retirement planning, which can lead to smaller pension pots. 
  • Underestimating your expenses and not accounting for a safety net for unexpected expenses. 
  • Not having an investment strategy or having the wrong type of strategy that is outside your means (above or below!) – resulting in your goals not being met within your desired timeframe.
  • Failing to adjust plans around your life and individual circumstances. A regular review with your financial adviser will help keep you on track.


How can I retire early?

The dream for many people is to meet their financial goals early and retire young! Some things you can do to help this process along include:

  • Increasing your savings rate to help you accumulate sufficient funds for an earlier retirement.
  • Investing wisely by creating (and sticking to!) an investment strategy that balances risk and returns to grow your retirement funds.
  • Generating passive income through diverse income streams such as rental properties, investments outside your pension pots, and more. 
  • Downsizing – bigger is not always better, so if downsizing makes sense in your circumstances, the extra funds can contribute to your retirement pot.
  • Understanding the Government schemes available to you – this process can be complicated which is why we’re on hand to help you make the most of the schemes and grants.


Contact MMG Chartered Accountants & Verus Wealth

Take full charge of your financial future and begin your pension planning with the help of our partners, Verus Wealth. Contact us by emailing  or popping into your local branch