Are you saving enough for retirement? Use this guide to estimate what your pension pot might be worth, how much income it could provide, and whether you’re on track.
Table of Contents
How Much Do You Need to Retire?
The Pensions and Lifetime Savings Association (PLSA) defines three retirement living standards:
| Standard | Single Person (per year) | Couple (per year) | What It Covers |
|---|---|---|---|
| Minimum | £14,400 | £22,400 | Basic needs, limited leisure |
| Moderate | £31,300 | £43,100 | Some holidays, modest car, eating out |
| Comfortable | £43,100 | £59,000 | Regular holidays, newer car, spa days |
Required Pension Pot (After State Pension)
Assuming you retire at 67 and draw down your pension over 25 years (4% withdrawal rate):
| Standard | Annual Income Needed | State Pension (full) | Gap to Fill | Pension Pot Required |
|---|---|---|---|---|
| Minimum (single) | £14,400 | £11,973 | £2,427 | £60,675 |
| Moderate (single) | £31,300 | £11,973 | £19,327 | £483,175 |
| Comfortable (single) | £43,100 | £11,973 | £31,127 | £778,175 |
| Minimum (couple) | £22,400 | £23,946 | £0 | £0 |
| Moderate (couple) | £43,100 | £23,946 | £19,154 | £478,850 |
| Comfortable (couple) | £59,000 | £23,946 | £35,054 | £876,350 |
State Pension 2026/27
| Detail | Amount |
|---|---|
| Full new State Pension | £230.25/week (£11,973/year) |
| Qualifying years needed | 35 years NI |
| Minimum years to get any pension | 10 years NI |
| State Pension age | 67 (rising to 68 between 2044-2046) |
Check your State Pension forecast at gov.uk/check-state-pension.
Workplace Pension Contributions
Under auto-enrolment, minimum contributions are:
| Component | Minimum Rate | On Qualifying Earnings |
|---|---|---|
| Employee contribution | 5% (includes tax relief) | £6,240–£50,270 |
| Employer contribution | 3% | £6,240–£50,270 |
| Total minimum | 8% | £6,240–£50,270 |
Pension Growth: Minimum Contributions (8% on Qualifying Earnings)
| Salary | Monthly Contribution | After 10 Years (5%) | After 20 Years (5%) | After 30 Years (5%) |
|---|---|---|---|---|
| £25,000 | £125 | £19,400 | £51,500 | £104,100 |
| £30,000 | £159 | £24,600 | £65,400 | £132,200 |
| £35,000 | £192 | £29,800 | £79,200 | £160,200 |
| £40,000 | £225 | £34,900 | £93,100 | £188,200 |
| £50,000 | £292 | £45,300 | £120,700 | £244,200 |
Pension Growth: Higher Contributions (15% on Full Salary)
| Salary | Monthly Contribution | After 10 Years (5%) | After 20 Years (5%) | After 30 Years (5%) |
|---|---|---|---|---|
| £30,000 | £375 | £58,100 | £154,400 | £312,200 |
| £40,000 | £500 | £77,500 | £205,900 | £416,200 |
| £50,000 | £625 | £96,900 | £257,300 | £520,300 |
| £60,000 | £750 | £116,200 | £308,800 | £624,300 |
| £80,000 | £1,000 | £155,000 | £411,700 | £832,400 |
Pension Tax Relief
One of the biggest benefits of a pension is tax relief on contributions:
| Tax Rate | You Contribute | Government Adds | Total in Pension |
|---|---|---|---|
| Basic Rate (20%) | £80 | £20 | £100 |
| Higher Rate (40%) | £60* | £40 | £100 |
| Additional Rate (45%) | £55* | £45 | £100 |
*Higher and additional rate taxpayers claim the extra relief through Self Assessment.
Annual Pension Allowance 2026/27
| Detail | Amount |
|---|---|
| Annual Allowance | £60,000 |
| Tapered Annual Allowance (high earners) | £10,000–£60,000 |
| Taper starts at | £260,000 adjusted income |
| Money Purchase Annual Allowance | £10,000 |
| Lifetime Allowance | Abolished (from April 2024) |
How Age Affects Required Savings
Starting later means you need to save significantly more:
| Age Started | Years to 67 | Monthly Savings Needed (Moderate, Single, 5% Growth) |
|---|---|---|
| 22 | 45 | £250 |
| 25 | 42 | £290 |
| 30 | 37 | £390 |
| 35 | 32 | £530 |
| 40 | 27 | £750 |
| 45 | 22 | £1,100 |
| 50 | 17 | £1,750 |
| 55 | 12 | £2,900 |
These estimates target a pension pot of approximately £483,000 (moderate single standard) in addition to the State Pension.
SIPP vs Workplace Pension
| Feature | Workplace Pension | SIPP |
|---|---|---|
| Employer contributions | Yes (min 3%) | No |
| Tax relief | Automatic | Automatic (basic rate) |
| Investment choice | Limited | Wide range |
| Fees | Often low (employer-negotiated) | Varies by platform |
| Flexibility | Limited | Full control |
| Best for | Main pension (get employer match) | Additional saving + control |
Recommended approach: Contribute enough to your workplace pension to get the full employer match, then top up with a SIPP if you want more investment choices.
For a deeper dive, see our pension guide.
Pension Drawdown vs Annuity
At retirement, you can take your pension as:
| Option | Pros | Cons |
|---|---|---|
| Drawdown | Flexible, potential growth, inheritance | Investment risk, could run out |
| Annuity | Guaranteed income for life | No flexibility, poor rates, no inheritance |
| Combination | Balance of security and flexibility | More complex |
Drawdown: Safe Withdrawal Rates
| Withdrawal Rate | £200,000 pot | £400,000 pot | £600,000 pot |
|---|---|---|---|
| 3% (conservative) | £6,000/year | £12,000/year | £18,000/year |
| 4% (standard) | £8,000/year | £16,000/year | £24,000/year |
| 5% (aggressive) | £10,000/year | £20,000/year | £30,000/year |
Current Annuity Rates (Indicative, Age 67)
| Pot Size | Annual Income (single life, no escalation) |
|---|---|
| £100,000 | ~£6,800 |
| £200,000 | ~£13,600 |
| £300,000 | ~£20,400 |
| £500,000 | ~£34,000 |
Tax on Pension Income
| Income Source | Tax Treatment |
|---|---|
| 25% tax-free lump sum | Up to 25% of pot, tax-free |
| Remaining 75% (drawdown or annuity) | Taxed as income |
| State Pension | Taxed as income |
Your total taxable income in retirement includes State Pension + pension drawdown/annuity + any other income. See the income tax bands for current rates.
Bottom Line
Most people aren’t saving enough for a comfortable retirement. The minimum workplace contribution of 8% typically achieves only a minimum retirement standard. Aim to contribute at least 12-15% of your salary (including employer contributions) starting in your 20s or 30s. The earlier you start, the more compound growth works in your favour.
For more retirement planning, see our pension guide, average pension pot by age, and ISA guide.
