Knowing how much you need for retirement can feel like guessing how long a piece of string is - but the best thing you can do is be prepared.
In this guide, I’ll explain how you can do that by looking at how much retirement costs in the UK, what the difference is between a state and private pension and what to do if you’re behind with your savings plan.
Plus, I’ll work out how much you need to be saving now based on your age and income. 
Key takeaways
- How much you need to retire depends on your lifestyle, housing costs and when you want to stop working.
- The State Pension can provide a foundation, but you may need workplace pensions, personal pensions or other savings to cover your costs.
- A free pension calculator can help you estimate your retirement income and work out how much to save each month.
What does retirement actually cost?
The amount you want to save for retirement really depends on what standard of living you want and when you want to retire. As a rule of thumb, experts usually say you want to have two-thirds of your income when you retire, available per year. This is around 6 to 8 times your final salary saved before you retire.
As a guide, you could use the Pensions UK Retirement Living Standards numbers, they split the amount you need into three categories - minimum, moderate and comfortable. These numbers are spending budgets, after tax.
However, it’s worth keeping in mind that these are based on someone living outside London, so you will need to think about your housing costs and whether your mortgage would be paid-off, as you would require more income.
| Living standard | One person: yearly | One person: monthly* | Couple: yearly combined | Couple: monthly combined* | What it could cover |
|---|---|---|---|---|---|
|
Minimum
|
£13,900
|
£1,158
|
£22,500
|
£1,875
|
Everyday essentials, some leisure activities and a week’s UK holiday. No car.
|
|
Moderate
|
£32,700
|
£2,725
|
£45,400
|
£3,783
|
More flexibility, a small second-hand car, an overseas holiday and a UK weekend break.
|
|
Comfortable
|
£45,400
|
£3,783
|
£62,700
|
£5,225
|
More spending on meals out and leisure, a small second-hand car, an overseas holiday and additional UK breaks.
|
How much does the state pension cover?
You can fund some of your retirement via the State Pension - but it’s likely that you’ll need a private retirement fund too to plug the gap.
At present, the new state pension is £12,548 a year or £241.30 per week, this is paid to men born after 6 April 1951 or women after 6 April 1953.
You need to have a minimum of 10 qualifying years of National Insurance to get state pension payments, while you need 35 years to receive the full New State pension.
The state pension rises every April under the Triple Lock, by whichever is highest - average wage growth, CPI inflation or 2.5%. Recent growth data suggests that the state pension could rise above £13,000 a year in April 2027. The rise is usually confirmed in the autumn Budget, which is on October 28 this year.
The current state pension age, e.g., the age you need to be to get it - is rising from 66 to 67 between 2026 and 2028. Under current plans it could rise to 68 by the mid-2040s. Government reviews may even bring this date forward due to changing life expectancy rates.
Here’s how much extra you need saved to plug the gap between the state pension and having different types of retirement, according to the Pensions and Lifetime Savings Association (PLSA) data*.
| Retirement standard | Yearly spending needed | Full new State Pension | Extra money needed each year* |
|---|---|---|---|
|
Minimum
|
£13,900
|
£12,548
|
£1,352
|
|
Moderate
|
£32,700
|
£12,548
|
£20,152
|
|
Comfortable
|
£45,400
|
£12,548
|
£32,852
|
How much do you need to save to retire?
This really depends on how long you expect to live, your income, savings and whether you own your home or any other assets. It also depends on what you want to do with the cash when you retire. However, as a rough guide, investment firm Fidelity suggests these pension milestones as a benchmark for your savings. These include other assets, not just pension savings.
| Age | Suggested savings target | £25,000 salary | £35,000 salary | £50,000 salary | £75,000 salary |
|---|---|---|---|---|---|
|
30
|
1 × annual salary
|
£25,000
|
£35,000
|
£50,000
|
£75,000
|
|
40
|
2 × annual salary
|
£50,000
|
£70,000
|
£100,000
|
£150,000
|
|
50
|
4 × annual salary
|
£100,000
|
£140,000
|
£200,000
|
£300,000
|
|
60
|
6 × annual salary
|
£150,000
|
£210,000
|
£300,000
|
£450,000
|
If you want to retire earlier, then you’ll need to have a bigger pot.
If you’re worried about whether your current savings are on track, then you should use a free pension calculator to help you work out how much you might need.
MoneyHelper’s pension calculator combines workplace, personal and state pension income, while Vanguard’s pension calculator allows you to change contributions and your retirement date to see how changing how much you save can help.
Anyone can use MoneyHelper to ask questions via its helpline on 0800 011 3797, this is open Monday to Friday, 9am-5pm.
If you’re over 50 and have a defined contribution pension, then you can get free pension advice via Pension Wise on 0800 138 3944.
What else counts as retirement income?
Your savings, including ISAs, can be used towards your retirement income. If you own your home, you may consider downsizing to a smaller property, and this could partly fund your retirement too.It’s also important to remember that your pension pot isn’t the only thing that matters.
How does a pension pot turn into retirement income?
- An annuity: you use some or all of your pot to buy a guaranteed income. A lifetime annuity pays for the rest of your life, with the amount depending on the rate and options you choose.
- Drawdown: you leave money invested and take withdrawals. This offers flexibility, but your investments can fall in value, and the money could run out.
You can also combine these options. Taking a lump sum to spend at the start of retirement leaves less money to provide income later.
A defined benefit pension, such as a final salary or career average scheme, works differently: it pays an income calculated under the scheme’s rules, rather than relying on a pot you manage yourself.
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