It is the question we are asked more than any other: how much is enough? There is no single number that works for everyone, but there are sensible benchmarks, and there is a way to work out your own figure without a finance degree. Here is our plain-speaking guide.
Start with the lifestyle, not the number
A retirement pot is not a trophy. It is a means of paying for the life you want when you stop working. So the honest starting point is not a spreadsheet, it is a conversation about how you actually want to spend your time.
The Retirement Living Standards, produced by the Pensions and Lifetime Savings Association, translate that into three broad tiers for a single person and a couple:
- Minimum covers all your needs with a little left over for fun: a modest food shop, no car, a UK break each year.
- Moderate gives you more financial security and flexibility: a small car, a two-week holiday in Europe, more room for treats.
- Comfortable allows more financial freedom and some luxuries: regular beauty treatments, theatre trips, and the ability to help family.
Most people we speak to are aiming somewhere between moderate and comfortable. Being specific matters, because the gap between those tiers can be tens of thousands of pounds of saving.
Do not forget the State Pension
The full new State Pension is a genuine foundation, and it is easy to underestimate it. For a couple who both qualify for the full amount, it can cover a substantial share of a minimum or moderate lifestyle before your own pension does any work at all.
Two practical steps:
- Check your State Pension forecast on GOV.UK to see what you are on track to receive and from what age.
- Check your National Insurance record for gaps. Filling a gap can sometimes be one of the best-value things you ever do with a lump sum.
The rule of thumb, and its limits
A common shorthand is that you will need around two thirds of your pre-retirement income to maintain your standard of living. It is a reasonable opening estimate, because in retirement you typically stop paying pension contributions and National Insurance, and many people have finished their mortgage.
But treat it as a starting point, not gospel. Your own figure moves depending on whether you will still have a mortgage or rent to pay, whether you plan to support children or grandchildren, and how much you want to travel in those first energetic years.
Front-load your thinking about the early years
Retirement spending is rarely a flat line. Many people spend more in the first five to ten years, when health and enthusiasm are at their peak, then settle into a quieter middle phase, before costs potentially rise again if care is needed later. Planning for a single average figure can leave you feeling squeezed exactly when you want to be enjoying yourself.
Small changes, big difference
If the gap looks daunting, remember that time and tax relief do a lot of the heavy lifting:
- Increase contributions gradually. Raising what you pay in by one or two per cent when you get a pay rise is barely felt in your take-home pay.
- Claim all the tax relief you are due. Higher and additional rate taxpayers often need to claim the extra through self-assessment.
- Check your employer will match more. Many schemes will increase their contribution if you increase yours. That is free money you are otherwise declining.
- Track down old pots. Bringing scattered pensions together can cut charges and make your total far easier to see.
Where we come in
As a mutual, Royal London is owned by our customers rather than shareholders, so the guidance we give is shaped by your interests. Eligible customers may also share in our profits through ProfitShare, which has awarded over two billion pounds to date and can quietly boost the pot you are building.
Use our free pension calculator to put a real number against your own plans, then revisit it once a year. Retirement planning is not a single decision. It is a series of small, well-informed ones.
This article is for general information and is not personal advice. If you are unsure what is right for you, speak to a financial adviser.