How much should I have in my pension?

Knowing how much to save for later life is tricky. Retirement can feel like something to think about down the line, especially when you’re young and in the middle of your career.

But, the sooner you start putting a plan together and working out how much you’ll need, the easier it can be to set money aside.

Having an end goal to work towards can give you purpose and direction with your saving.

Plus, you can regularly check in at different life stages to monitor your progress.

So how much do you need to save for retirement?

What you need in your pension each decade

In truth, what you need for retirement depends on your personal circumstances - we’ll come back to this idea at the end.

First, let’s look at what retirement could cost on average. For that, we’ll use Pensions UK’s Retirement Living Standards.

These are an estimate of the average annual cost of retirement, updated each year. It breaks the cost of retirement down into three lifestyles: minimum, moderate, and comfortable.

We’ll base our calculation on a moderate standard of living. That’s a retirement lifestyle which each year includes things like:

• £500 for maintaining your property, and £300 in case of emergencies;
• around £59 a week for groceries, plus £33 a week for food out of the home;
• a three-year-old car, replaced every seven years;
• a fortnight three-star all-inclusive holiday in the Med, plus a UK off-peak staycation; and
• up to £1,500 for clothing and footwear.

They also assume you have no housing costs, such as rent or mortgage payments.

In 2026/27, the figures for how much you need each year for a moderate retirement are:

• £32,700 for individuals; and
• £45,400 for couples - that’s a combined household income between two people.

With these figures in mind, we can then work out that a single person would need total pension savings of £503,825. 

This assumes that you receive the full new State Pension, and retire at State Pension age. In 2026/27, the full new State Pension pays £12,547 a year once you reach State Pension age (66, rising to 67 by 2028).

It’s based on annual withdrawals of 4%, increased by inflation each year. This withdrawal rate historically means your pot’ll last for at least 30 years. However, it’s not a perfect science, and that rate might not be appropriate for everyone.

These calculations also assume no tax, but pension income - including from the State Pension - is potentially taxable. So, you might need more in your pension to achieve this income when taking tax into account.

How much should I have in my pension throughout my career?

With this figure in mind, you can then work backwards. Using the PensionBee Pension Calculator, you can work out what you’d need to have saved throughout your life to reach those targets.

The table below shows you what you’d need to build a pot of that size at 30, 40, 50, and 60 as an individual.

The figures make the following assumptions:

• £350 personal monthly contribution, including tax relief;
• £250 employer monthly contribution;
• 5% annual investment growth;
• 2.5% annual inflation;
• 0.7% in pension fees;
• a retirement age of 67; and
• you don’t take your 25% tax-free lump sum (from 55, rising to 57 from 2028).

Note: total pension savings figures are rounded.

These figures show the power of starting early. If you begin contributing at 30 and keep doing so, you have enough time to set money aside and give it the chance to grow so you can enjoy later life.

They don’t show the impact of increasing contributions, either. As you progress through your career, your earnings might rise. That could allow you to increase how much you pay into your pension too.

Doing so could help you hit your goal sooner. That might allow you to retire earlier, or with more saved than you thought you might have.

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Save for your future with PensionBee

The Retirement Living Standards are a good guide for what you’ll need for later life.

But they’re just that - a guide.

What you’ll need for retirement is actually completely personal to you. It’ll depend on things like:

• when you want to retire;
• what you want to do with your time;
• what sort of lifestyle you’re aiming for; and
• whether you’re single or in a couple.

Putting these elements together, you can work out your own personal number to aim for. Then, you can use tools like the PensionBee Pension Calculator to give you an idea of how much you’d need to save to achieve it.

You can see what impact increasing your contributions would have. You can also add or remove the full new State Pension. So, if you won’t make enough National Insurance contributions, you can take that off your calculation. You need 35 years on your record to receive the full amount.

By working out what you need and what it’d take to get there, you can have the confidence that you’re on track for the retirement you want.

Risk warning

As always with investments, your capital is at risk. Past performance is not an indicator of future performance. The value of your investment can go down as well as up, and you may get back less than you invest. This information should not be regarded as financial advice.