Savings laddering: Could the overlooked strategy help boost your retirement income?

As retirement approaches, you may start thinking carefully about how you might turn any savings into a reliable income. 

Your retirement funds might come from several sources, including pensions, investments, and cash savings. 

While your pensions and investments could support your long-term goals, cash can still help you cover short-term spending or unexpected costs without needing to sell investments at an inconvenient time. 

Still, holding too much money in an easy access savings account could mean you miss out on higher interest rates elsewhere. 

This is why you might want to consider a strategy known as “savings laddering”. 

Research from Investec found that 42% of UK adults hold multiple mixed-rate accounts with different maturity dates.

Moreover, 72% of those using a laddering strategy did so to access the best rates available, while 39% valued the flexibility it offered. 

With this in mind, continue reading to discover how savings laddering works and whether it could boost your income in retirement.

Different savings accounts offer various levels of access and interest 

Before considering savings laddering, it’s useful to understand the main types of cash savings you might use in retirement. 

An easy access account usually allows you to withdraw money when you need it. This can be useful for emergency savings, day-to-day costs, or expenses you expect to face in the near future.

However, interest rates on these accounts might be less competitive than those on other forms of savings accounts. 

A notice account might offer a higher rate, but you typically need to give notice before withdrawing your wealth. This could be 30, 60, or 90 days, depending on the account.

Meanwhile, a fixed-rate account normally pays a guaranteed rate for a set term, such as one, two, or five years.

This could be attractive if you want certainty over the interest you’ll receive. 

The trade-off is, of course, access. You’ll usually be required to “lock away” your money for a set period, and if early withdrawals are allowed, they may come with penalties.

As such, the challenge in retirement is often finding the right balance between income, access, and security.

Savings laddering involves splitting your money across accounts with different maturity dates

Rather than placing one lump sum into a single fixed-rate account, savings laddering involves dividing your money across several accounts that mature at different times.

For instance, you might keep enough money in an easy access account to cover emergencies and short-term spending.

Then, you could place the remaining cash into several fixed-rate accounts that mature after one, two, and three years. 

When the one-year account matures, you can decide whether to:

• Use the money to support your retirement income

• Move it into an easy access account

• Reinvest it into a new fixed-rate account

• Split it between spending and reinvestment.

This creates a cycle where some of your cash becomes available at regular intervals.

Over time, this could help you earn more interest than leaving everything in an easy access account while avoiding the need to lock all of your savings away for several years at once.

This can be particularly beneficial in retirement, as you may want to keep part of your money available for unexpected costs while using other savings to generate interest for future spending.

There are some important tax considerations to keep in mind

Savings laddering can be useful, but there are some important factors to consider. For instance, interest from savings may be taxable if it exceeds your Personal Savings Allowance. In 2026/27, this is:

• £1,000 for basic-rate taxpayers

• £500 for higher-rate taxpayers

• £0 for additional-rate taxpayers.

If you hold significant cash savings, the interest you receive from fixed-rate accounts could inadvertently increase your tax bill. 

What’s more, some fixed-rate accounts pay interest annually, while others pay it when the account matures. 

If several years of interest are paid in one tax year, this could push more of your savings income above your allowance.

It may also be prudent to consider the Financial Services Compensation Scheme (FSCS) limit. As of 2026/27, any cash held with authorised UK banks and building societies is protected up to £120,000 per person per authorised firm. 

If you have large cash savings, spreading money across various providers could help you remain protected.

And it’s vital not to lock away money you may need unexpectedly.

Even if laddering gives you regular access, some of your savings will still be tied up until maturity. 

For higher and additional rate taxpayers, a similar approach can be used using UK Government Gilts to deliver tax-efficient capital and income on a laddering basis. 

A financial planner could help you determine your retirement strategy

While laddering could help you make better use of cash in retirement, the strategy won’t necessarily suit everyone. 

We could help you understand how much cash you may need and how your savings could support your retirement income.

We’ll also use sophisticated cashflow modelling to explore how different income strategies may affect your long-term financial plan.

Email info@athertonyork.co.uk or call us on 0208 882 2979 to find out more.

Please note

This article is for general information only and does not constitute advice. The information is aimed at retail clients only.

All information is correct at the time of writing and is subject to change in the future.

Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.

The Financial Conduct Authority does not regulate tax planning or cashflow planning.

The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance. 

Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.

A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance. 

The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts.