If you’re hoping to enjoy a comfortable retirement when you stop working, check your pension savings now, as the amount of money you’re likely to need may come as a shock.
A single person would need a whopping £738,000 to achieve a comfortable lifestyle in retirement, according to wealth manager Quilter, up £100,000 compared to the amount needed last year. This increases to an eye-watering £929,000 in joint pension wealth for a couple both hoping to retire comfortably.
Alice Guy, head of pensions and savings at interactive investor, said: “The amount needed for a moderate retirement has skyrocketed during the past year. That’s partly due to the damaging impact of inflation, which hits those on a low income the hardest. But it’s also partly due to changing expectations about retirement. With ongoing rising costs, older generations increasingly want to help out younger family members.”
Here we explain why such vast sums are needed, and look at some of the steps you might be able to take to boost your retirement savings.
If you’re thinking about getting professional financial advice, you can find a local financial adviser on VouchedFor or Unbiased.
Alternatively, if you’re looking for somewhere to start, we’ve partnered with independent advice firm Fidelius to offer Rest Less members a free initial consultation with a qualified financial advisor. There’s no obligation, however if the adviser feels you’d benefit from paid financial advice, they’ll talk you through how that works and the charges involved.
Fidelius are rated 4.7 out of 5 from over 1,000 reviews on VouchedFor, the review site for financial advisors.
Why do I need so much to retire comfortably?
The thought of needing nearly three-quarters of a million pounds to retire comfortably might seem pie in the sky, but these calculations are based on the Pensions and Lifetime Savings Association’s (PLSA’s) Retirement Living Standards research, which has been updated this month to factor in annual inflation.
The PLSA report looks at how much people are likely to need in retirement to achieve either a minimum, moderate or comfortable retirement. A comfortable retirement is defined as one which provides you with relative financial freedom and a few luxuries each year, such as a fortnight 4* holiday in the Mediterranean with spending money, and three long weekend breaks in the UK.
It also factors in costs such as an extensive bundled broadband and TV subscription, up to £1,500 a year for footwear and clothing costs and around £70 a week on food, plus £40 a week on food out of the home, £20 a week on takeaways, and £100 a month to take others out for a monthly meal.
It would cost a single person £43,300 a year to fund this kind of lifestyle in retirement, according to the PLSA. This would require them to have annual income (before tax) of £39,387 per year on top of the state pension, which in 2024-25 is £11,500.
They would need a pension pot of £738,000 to provide them with this level of income if they were buying an annuity. This amount has been calculated assuming an escalating income of 3% based on someone who is aged 66 (which is the current age to receive the State Pension), and an annuity rate of 5.34%. You can find out more about annuities and how they work in our articles Your pension options at retirement and Annuities explained.
Jon Greer, head of retirement policy at Quilter, said: “The major worry is that these figures are all based on the assumption that the pensioner does not have any housing costs on top of any lifestyle costs. According to the Pensions Policy Institute (PPI) by the year 2041 there could be up to 3.6 million households renting while in retirement, 1.9 million more than today.
“Future generations that have not been able to secure a home and are renting in retirement or perhaps are still paying off marathon mortgages then this is going to eat further into someone’s pension pot. There is also the yet to be addressed social care crisis. Many people are living longer but not necessarily in good health and getting the right care can be hugely expensive.”
How much do I need for a moderate retirement lifestyle?
If you want to achieve what the PLSA defines as a moderate retirement lifestyle, a single person will need to build up a pension pot of approximately £459,000, up from £301,000 compared to last year’s calculations.
This would be enough to provide an annual income of £31,300, the amount needed to fund a moderate lifestyle in retirement. Again, these calculations assume an escalating income of 3% based on someone who is aged 66 (which is the current age to receive the State Pension), and an annuity rate of 5.34%.
A moderate lifestyle includes being able to spend £55 a week on groceries, £30 a week on food out of the home, £10 a week on takeaways and £100 a month to take others out for a monthly meal, as well as a two week 3* break in Europe and a long weekend away in the UK every year. Gifting £1,000 to family was also highlighted as a necessity among retirees aiming for a moderate or comfortable lifestyle.
How big a pension do I need for a minimum retirement lifestyle?
Finally, for someone looking to achieve a minimum lifestyle which requires them to have £3,357 in extra income per year on top of the State Pension they need to have built up a pot of around £63,000. A minimum lifestyle enables someone to spend £50 on a weekly food shop and take a week long holiday in the UK. However, it would not provide enough to pay for a car, but it does include a budget of £10 per week for taxis, and £100 per year to spend on rail fares.
If your target is a minimum retirement, then for most of us, our private and state pensions (the full state pension for 2024-25 is £11,500 per year), and other savings should go a long way towards these costs.
The table below shows how much you’d need to have in retirement savings to fund a minimum, moderate or comfortable retirement.
| Single | Income | Pension pot |
| Comfortable | £39,387 | £738,000 |
| Moderate | £24,482 | £459,000 |
| Minimum | £3,357 | £63,000 |
| Joint | ||
| Comfortable | £44,464 | £929,000 |
| Moderate | £24,590 | £514,000 |
| Minimum** | – | – |
Source: Quilter
*Calculations assume an escalating income of 3% based on someone who is aged 66 (which is the current age to receive state pension). All pots rounded to the nearest thousand. For the singles an annuity rate of 5.34% was used. For the Joints it was 4.79%.
** Minimum for a couple is covered by the State Pension
How can I boost my pension savings?
Most of us can only dream about having the amounts shown above in our pensions, but remember that the actual amount you’ll need in retirement is very personal to you, and will depend on your individual circumstances.
Helen Morrissey, head of retirement analysis, Hargreaves Lansdown, said: “It’s worth emphasising that these are not prescriptive numbers – everyone’s view of what makes for a good retirement is different, and so your income needs could well differ from these figures.
“However, it does show the huge challenges we face in saving for retirement. First is the role of the state pension. This forms the very bedrock of our retirement income. A couple where both partners get the full amount will hit the minimum income standard for retirement before their other pensions come into play. This is an enormous boost, but the State Pension age is under pressure with recent reports saying it may need to hit age 71 in the near future. This has a massive impact on how much we need to save. This is particularly the case for single people, who are unable to share living costs as a couple would.”
The good news is that there are plenty of steps you might be able to take to boost your pension pot – and ultimately the amount you receive in retirement – from topping up your State Pension to tracking down any lost pensions. For example, If you’re an employee, it’s worth seeing if your company will pay more into your pension if you increase your contributions. Employer pension contributions can be thought of as a delayed pay rise that you’ll receive in retirement, and can be immensely valuable. Find out more in our guide 11 simple ways to top up your pension.
If you’re thinking about getting professional financial advice, you can find a local financial adviser on VouchedFor or Unbiased.
Alternatively, if you’re looking for somewhere to start, we’ve partnered with independent advice firm Fidelius to offer Rest Less members a free initial consultation with a qualified financial advisor. There’s no obligation, however if the adviser feels you’d benefit from paid financial advice, they’ll talk you through how that works and the charges involved.
Fidelius are rated 4.7 out of 5 from over 1,000 reviews on VouchedFor, the review site for financial advisors.
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