How much pension do I need to retire?
Pick the yearly income you want in retirement and this works out the pot behind it and what to save each month, after the State Pension has done its share.
How the target becomes a pot
Start with the income you want each year. Take off the State Pension, which is a guaranteed, inflation-linked income that covers a large part of a minimum or moderate lifestyle. What is left must come from your own pot. Divide that yearly figure by a sustainable withdrawal rate, around 4%, and you get the pot you need. The monthly saving then comes from working backwards over the years you have, allowing for growth above inflation.
Worked example
Aim for the PLSA moderate income of £32,700 a year as a single person. The full State Pension provides about £12,548, leaving £20,152 to come from your pot. At a 4% withdrawal rate that needs a pot of roughly £503,810. Starting 30 years out with nothing saved, and 3% real growth, that works out at about £871 a month.
The PLSA standards
| Minimum (covers the basics) | £13,900/year |
| Moderate (more financial security) | £32,700/year |
| Comfortable (more freedom and luxuries) | £45,400/year |
These are the Pensions and Lifetime Savings Association figures for a single person living outside London. Couples can share costs, so the per-person figure is lower. Treat them as a sense check, not a rule, because your own housing costs and plans matter more than any average.
Common questions
How much do I need to retire in the UK?
The PLSA Retirement Living Standards put a single person's minimum at £13,900 a year, moderate at £32,700, and comfortable at £45,400. The full new State Pension covers about £12,548 of that, so your own pot only has to fund the gap.
How big a pension pot do I need?
A rough rule is to divide the income you need from your pot by a sustainable withdrawal rate of about 4%. For a £32,700 moderate income, after the State Pension you need roughly £20,152 a year from the pot, which points to a pot of about £503,810.
How much should I save each month?
It depends on how long you have. Starting 30 years out, at 3% real growth, reaching that pot takes about £871 a month. Starting later means a steeper monthly figure, which is why beginning early matters so much.
Does the State Pension count towards my target?
Yes, and it should. The full new State Pension is a sizeable, inflation-linked, guaranteed income that covers a large part of a minimum or moderate lifestyle. Netting it off first is why the private pot you need is smaller than the headline target suggests.