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Sign up nowHow much will you need to retire?
Work out if you're on track for the lifestyle you want when you stop working
When you stop working is up to you, but whether you can afford the retirement lifestyle you want all comes down to how much you've managed to save.
In a 2024 survey carried out by Which?, 51% of people yet to retire said they weren't confident how much money they'll need to deliver a comfortable retirement.
Here we'll give you get a better idea of how much money you'll need in retirement, and how much you'll need to save in advance to generate that income.
How much income should you aim for in retirement?
Saving as much as possible, as early as possible, into your private pensions will help put you in the strongest financial position for life after work. But it's hard to know exactly how much you should aim for.
The Pension and Lifetime Savings Association (PLSA) has developed three ‘retirement living standards’ to help address this problem. These reflect the amounts you’d need for a minimum, moderate and comfortable standard of living in retirement:
| Single-person household | Two-person household | |
| Minimum | £14,400 | £22,400 |
| Moderate | £31,300 | £43,100 |
| Comfortable | £43,100 | £59,000 |
Source: PLSA retirement living standards. The figures shown reflect annual expenditure required to achieve each standard
The targets for a person living alone might seem high compared with those for couples, but this reflects the fact that many costs – such as energy bills, broadband and home insurance – are virtually the same even if you live alone.
How far will your retirement income stretch?
Each of the PLSA's three retirement living standards is based on the actual cost of a basket of goods and services.
Here’s a typical budget for a single retiree aiming for each of the standards across six spending categories:
| Minimum | Moderate | Comfortable | |
| House | DIY - £100 per year to maintain property | Some help with maintenance and decorating | Replace kitchen/bathroom every 10/15 years |
| Food | £50 per week on groceries | £55 per week on groceries | £70 per week on groceries |
| £25 per month eating on the go | £30 per week eating on the go | £40 per week eating on the go | |
| £15 per fortnight on takeways | £10 per week on takeways + £100 meal | £20 per week on takeways + £100 meal | |
| Transport | No car | 3 year old small car, replaced every 7 years | 3 year old small car, replaced every 5 years |
| £10 per week on taxis/£100 per year rail fares | £20 per month on taxis/£100 per year rail fares | £20 per month on taxis/£200 per year rail fares | |
| Holidays and leisure | A week long UK holiday | A fortnight 3* all inclusive holiday in the Med and a long weekend break in the UK | A fortnight 4* holiday in the Med with spending money and 3 long weekend breaks in the UK |
Source: PLSA
Where will your retirement income come from?
A combination of the state pension and private pensions are the building blocks of most people's retirement income.
State pension
You'll qualify for payments when you reach 66, but this is scheduled to rise to 67 between 2026 and 2028.
In 2024-25, the full level of new state pension (for people who reach state pension age on or after 6 April 2016) is £221.20 a week (£11,502.40 a year), but not everyone gets that much. Find out more in our guide to how much state pension will I get?
Final salary pension
If you have a final salary (also known as defined benefit) pension, you’ll receive a guaranteed income, which is calculated based on your length of service and your earnings while you were working. Deduct tax and you should have a good idea how close you are to your target amount.
You should receive annual updates telling you how much you can expect to get.
Defined contribution pension
Defined contribution pensions are the most common type of private pension. You (and your employer, if it's a workplace scheme) pay money in, which is then invested.
The amount you get when you retire depends on how much you've contributed, how well the investments have performed, and how you decide to access your pot.
Your options for accessing this money are:
- Buying an annuity, which guarantees an income each year for life
- Pension drawdown, where you leave your pension invested and take income as you need it
- Taking lump sums
How much do you need to save to reach your target retirement income?
The PLSA's retirement living standards are designed to give you a better idea of how much you might need to spend each year in retirement. The next step is working out how much you'll need to save in your pension to generate the gross (before tax) annual income you want.
We've calculated how much you would need in your private pensions to reach the moderate living standard of £31,300 a year, if you are single:
- £375,100 if you opt for drawdown
- £406,900 if you opt for an annuity
For a couple, this is how much you'd need in your private pensions to reach the moderate living standard of £43,100 a year:
- £376,700 if you opt for drawdown
- £408,600 if you opt for an annuity
Retirees living alone face a tougher challenge, given their higher relative expenditure combined with lower state pension and tax-free allowance compared with a couple. So singles have to produce a relatively bigger pot.
Our drawdown figures are based on a saver withdrawing all their money over 20 years from age 65, and assume investment growth at 3%, inflation at 1% and charges of 0.75%.
Annuities are a more expensive option than drawdown because they produce a guaranteed income for life which might stretch beyond the average 20-year retirement.
When should you start saving for retirement?
The earlier you can start saving for retirement, the better.
When you pay money into a pension you benefit from tax relief. If you're a basic-rate taxpayer, this means that a £100 contribution is boosted to £125. Thanks to tax relief and investment growth, any contributions you make today are likely to be worth much more by the time you retire.
Under auto-enrolment rules, the minimum total contribution for a workplace pension scheme is 8% of your ‘qualifying earnings’ - made up of 5% from you (including tax relief) and 3% from your employer.
You can opt to pay in more than this - a great idea if you can afford to do so. Some employers will even match your contributions.
- To get a better idea of how much your pension pot might be worth at retirement, and how much income this could give you, use Which?’s free pension calculator.
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