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retirement planning

How much pension do I need to retire?

published: 27 September 2022
Read time: 5 minutes

If you're planning for the future, you're probably wondering how much you should be saving for your retirement. Our guide can help you navigate the options

We've teamed up with chosen partner Profile Pensions to help you choose the right private pension plan. They can help you track down and combine your old pensions if you decide it's in your best interests to do so and help you choose the best investment plan for you, using funds from the whole of the market. You'll also get your own dedicated pension adviser to answer any questions you may have. 

When should you start saving for a pension?

It's never too early - or too late - to start saving for a pension. You may be worried you've put it off for too long, and now a pension will either cost too much per month or give you too little in retirement. But you might be surprised at what you could achieve, even with small monthly savings.  

Clearly the earlier you start saving the more you’ll build up in your pension pot for old age. But even if you’ve not got around to it yet there could still be plenty of benefit in starting a pension.

couple with umbrella

Does saving or investing make the most sense?

Whether saving into a cash savings account or investing in equity-linked products makes the most sense will depend on your own financial circumstances, your age and how long you have until retirement, plus your attitude to risk. 

If you were to save in a cash ISA, for example, then you'd be able to access your money when you need it, at any age – you'd be fully in control. 

With a stocks and shares or equity ISA you’ll usually want to lock in your money for as long as possible to see the best returns and ride out the peaks and troughs of the stock market. But your money is not locked up. Most Isas offer the flexibility to access your cash should you need it at any time. The downside compared to a pension is that with an Isa there are no employer contributions or tax relief as you might get with a workplace pension. Isas are simply a savings wrapper that shields your cash or investment savings from income and capital gains tax.

In contrast, investing in a pension means you're committed to not touching the invested money until you're 55 (expected to rise to 57 from 2028). There are benefits to being able to access your money at any time as you can with savings or an Isa, but you could miss out on contributions from your employer or government tax relief by not saving into a pension.

Also with most pensions your money is invested in a range of investment assets and cash, including the stock market and bonds, so there is some risk to your capital – which is not the case with a cash Isa or other cash savings.

But pensions do offer greater flexibility now than ever before. Following a rule change in 2015, once you reach the age of 55 you can take as much money out of your pension as you wish – and the first 25% will be tax-free, with the rest taxed at your personal rate (prior to 2015 withdrawals were taxed at 55%). The age you can take out money is expected to rise to 57 from 2028.  

Still not sure whether a savings account or pension would suit you best? You can weigh up all the pros and cons with our detailed guide to pensions and savings.

How much do I need saved to retire in comfort?

How much you’ll need to retire comfortably will depend on your personal and financial situation. The first factor to consider is your living costs. Will you have paid off your mortgage by the time you retire, or will you be renting? Any loans or financing will need to be considered, along with other outgoings. 

A common misconception is that your pension income will need to match your current salary for you to maintain the same lifestyle. But this doesn't take into consideration that your outgoings could be far reduced in retirement. For example, you won't be paying tax at the same level, you may have paid off your mortgage, you're less likely to have dependent children, and you may not be commuting to and from work. A common rule-of-thumb is that your income post-retirement should be between half and two-thirds of your final salary. But you may want to take some time to think about your own circumstances and future goals for retirement and plan accordingly. Find out more in our pensions contributions guide.

How much should you have saved for retirement by age?

While there is no definite figure to aim at for retirement, you may be wondering if you can retire with a specific figure in mind. Retiring aged 60 with £500,000 could work for some, whereas others may feel they can retire comfortably with £300,000, aged 55. It all depends when you want to retire, the income you think you’ll need, how many years you’ll need that pension to last and how much money you can leave invested in your pension. 

One of the biggest factors in deciding how much you should put aside is the age at which you plan or want to retire. If you can put off retirement until later in life, you can potentially decrease the amount you have to set aside. It may be worth considering what sort of lifestyle you'll want when you’ve retired. Will you be living a life of luxury and taking foreign holidays? Or will you stay closer to home and do without the larger expenses? 

How much you should have saved by your retirement will also depend on the money you’re used to having. A good measure that’s often given as a guide is 10-times your final salary.This can seem like a daunting figure but setting yourself achievable goals can help. Could you save one year's salary by the time you're 30, for example?      

The table below gives a ballpark guide for savings by age, but everyone's situation and circumstances will be different so this can only act as a broad guide.


Target pension saved


One year's salary


2 x salary


3-4 x salary


5-6 x salary


5-6 x salary


7-8 x salary


8-9 x salary


9-10 x salary

67 (or State Pension age)

10 x salary

How do you start building for your retirement?

The best place to start with building for your retirement is to plan your projected outgoings and decide on the income you’ll need for your retirement. From there you can work out how much you need to have saved – and at what age you can afford to retire.  

For example, if you were earning £35,000 per year and can expect to do so until retirement, you may be aiming to retire at age 65. You might be able to set aside £300,000 throughout your career to put towards your retirement but would struggle to save any more than that. This would mean you would be below the 10-times final salary rule of thumb. By working two more years until the age of 67 you can look forward to a higher income as your pension pot will be covering fewer years. This also gives you a few extra years of earning, with your pension being invested for longer.

Our pension contributions guide can give you helpful ways to start saving and maximise your growing pension pot.

How do I start a private pension?

Setting up a private pension can be quick and simple online. But it is a good idea to take some time to do your research first. You don’t need a financial adviser or broker to arrange a private pension. But getting expert and impartial advice is a good idea if you're not a confident or experienced investor - although this will come with an added cost. 

We have teamed up with chosen partner Profile Pensions to help you choose the right private pension plan. They can help you track down and combine your old pensions if you decide it's in your best interests to do so and help you choose the best investment plan for you, using funds from the whole of the market. You will also get your own dedicated pension adviser to answer any questions you have.   

Capital at risk. This website does not constitute personal advice. If you are in doubt as to the suitability of an investment please speak to a financial adviser. Prevailing tax rates and reliefs are dependent on your individual circumstances and are subject to change. Ltd is an Introducer Appointed Representative of Profile Pensions, a trading name of Profile Financial Solutions Limited which is authorised and regulated by the Financial Conduct Authority. FCA number 596398. Registered in England & Wales, Company Number 07731925. Registered office address: Norwest Court, Guildhall Street, Preston, PR1 3NU.

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