THE Covid-19 pandemic has impacted every family’s circumstances, not least from a financial perspective. For those approaching retirement age, or who had aimed to retire early, employment circumstances, changes to income and market performance may well have forced a re-think of your plans.

As a result of changes to normal working routines, many are reviewing and reassessing what is most important to them and their families. For some, it may mean having to work for longer, while for others it may have done the opposite – you may be embracing the slower pace of life or deciding to retire before the end of the year.

Before making any major decisions about retirement, however, it is important to assess your financial situation and consider every possible source of income, as well as calculating how much income you expect to need.

Lockdown changed our spending patterns significantly, whether by eliminating the cost of a daily commute, visiting pubs and restaurants, or a big summer holiday. Some people might have managed to put away some extra cash over the last few months, with one study estimating that UK households saved an average of £2,879 during the 13 weeks of lockdown .

While it is a good idea for retirees to use any additional savings first, we would always recommend keeping an emergency fund equivalent to six months of expenses and building in any planned large one-off purchases. There will also be decisions to make about your pension pot and carefully planning how and when to access these funds will allow you to maximise annual allowances and tax-free benefits.

One option might be to take a tax-free lump sum from your pension. Retirees, or those who reach the age of 55 – and 57 from 2028, as the UK Government confirmed earlier this month – can withdraw up to 25 per cent of their defined contribution pot as a one-off, tax-free lump sum. While this option can give your bank balance a short-term boost, it can also have a potential knock-on effect for future income, which is important to factor in.

Depending on the size of your pension pot, 25% may in fact be much more than you need, especially while discretionary spending is down. Interest rates on savings have also dropped significantly, meaning there is little benefit from having this excess cash sitting in the bank.

For high-value pension pots, you also need to think about any inheritance tax implications, as this cash sum will then be counted as part of your overall estate. You might consider gifting some cash as part of your annual allowance, but with that comes another set of regulations to consider.

Retirees with multiple small pots should take some time to consider how to get the most from their pensions. One option is to take a small lump sum which could provide what might be a much-needed cash boost in the current climate.

If the value of a pension is under £10,000 you may be able to take it all as a small pot lump sum, irrespective of your overall pension's worth. If you withdraw the entire small pot, 25% is tax-free. Similarly, defined benefit schemes fall under triviality rules allowing a pension of up to £30,000 to be taken as a lump sum.

Alternatively, you may want to consider consolidating two or three small pots into a larger one and taking a 25% lump sum from that larger total – although there will potentially be transfer and exit fees to consider.

Importantly, any kind of drawdown from a pension has implications on tax rules around the amount you can pay into your pension and retirees should also be cautious of triggering the money purchase annual allowance (MPAA). In 2017/18 the MPAA dropped from £10,000 to £4,000 and it can be triggered by a number of events that might occur if pension contributions continue after initial crystallisation.

Anyone over the age of 55 who has perhaps been furloughed or made redundant in recent months may have chosen to access their pension to top up their income. However, this group needs to be aware of the MPAA when returning to work while accessing the flexible benefits of their pension, as it applies for the remainder of that individual’s lifetime.

Generally speaking, leaving your investments untouched for as long as possible allows more time for growth, and more time to potentially recover from market volatility. Nevertheless, when approaching retirement, you should also assess your appetite for risk, particularly if you do not have the luxury of a long investment horizon.

Retirement planning can be a complex process, so we always recommend consulting your adviser if you have one. There are a number of factors that can help you to get the most from your pension pots, especially during times of uncertainty, but careful planning is key.

Alan Harvey is a chartered financial planner at Brewin Dolphin Glasgow