Pension requirements: here’s what Brits are expected to have saved

The size of your pension pot will determine the quality of your retirement. So how much should you have stashed away for your later years?

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Retirement saving and pension planning

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Even if your retirement is decades away, saving into a pension now can ensure comfort in your later years. But how do you know if your pot is big enough? Here’s the lowdown on how much you’re expected to have saved.

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How much should you have saved in a pension?

The amount you need to save into a pension depends on the kind of lifestyle you expect to have after you give up work. 

Minimum lifestyle: £10,900 per year

According to the PLSA’s Retirement Living Standards, in order to sustain a ‘minimum lifestyle’ in retirement, a single person needs a pension income of at least £10,900 per year, while a couple needs £16,700.

The research considers a ‘minimum lifestyle’ to be enough to cover all of your needs and support the odd social occasion and meal out. Those in this bracket would be expected to spend approximately £41 per week on groceries, holiday in the UK, and use public transport. 

Moderate lifestyle: £20,800 per year

For those with bigger pension pots, a ‘moderate lifestyle’ can be sustained for single persons with a £20,800 annual income in retirement, while couples need £30,600.

Under this lifestyle definition, you could spend roughly £47 per week on groceries and own a used car. You could also enjoy one foreign holiday a year, and eat out a few times a month. 

Comfortable lifestyle: £33,600 per year

Those with the biggest pension pots can expect a ‘comfortable lifestyle’ in retirement. To set yourself up for such a lifestyle, you’ll need an annual income of at least £33,600, or £49,700 for a couple.

A comfortable lifestyle would allow for a £59 weekly food shop, regular meals out and the option to run a two-year-old car. Under this sort of retirement, you could take a number of overseas trips a year. You would also have the money to replace the kitchen and bathroom every 10 to 15 years.

What lifestyle will my pension pot support?

While the above figures give a rough indication of the annual income you need to sustain different retirement lifestyles, it’s impossible to know exactly how much you need in your pension pot to achieve them. That’s because your income in retirement will depend on:

  • Your living situation. If you have to pay rent in your retirement years, you’ll need a higher pension income than someone who owns their home outright.
  • The age you expect to retire. If you want to retire early, you’ll need a bigger pension pot to sustain your living costs for longer. 
  • How long you live for. If you live for a long time, there’s a danger your private pension pot could run out if it is too small or your retirement lifestyle is too extravagant.

What are average pension pots by age?

According to PensionBee, the average UK pension pot stands at £21,164. But average pots differ significantly between genders, with men having an average of £9,231 more saved in their pension pots than women.

PensionBee’s data reveals the average pension pot for men and women at different ages.

Average pension pot
Age Men Women
18-29 £3,925 £3,215
30-39 £12,075 £9,537
40-45 £33,598 £22,589
Over 50 £52,592 £28,249

With these figures in mind, those aged 18-29 can expect their pension pots to be worth roughly £140,700 by the time they reach 65 years old. Meanwhile, those aged 30-39 with an average pot can expect a slightly lower pension of £135,900 by the same age. Those aged 40-49 with average pots can expect £112,900, while those over 50 can expect just £87,500. 

These figures assume a 5% average annual return and a regular contribution of 8%, minus typical fees of 0.7%. 

What if your pot is lower than the average?

While there is no set amount you need to have saved in your pension, if your pot is below the average, you may wish to increase your contributions during your working years.

Alternatively, you may wish to reassess what you expect your retirement to look like and alter your savings goals, or lifestyle choices, accordingly.

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What about savings and other assets?

A large percentage of the population has wealth stashed away outside of pension pots in the form of savings, investments and property. If that includes you, take these factors into account before worrying about whether your pension pot is sufficient.

Are you looking to save more money? See our article outlining seven savings tips that actually work.

Please note that tax treatment depends on your individual circumstances and may be subject to change in the future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be considered so you should consider taking independent financial advice.

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