How Much Do You Need to Retire?
The Pensions and Lifetime Savings Association (PLSA) publishes retirement living standards that provide helpful benchmarks for how much income you need in retirement:
| Lifestyle Level | Single Person | Couple |
|---|---|---|
| Minimum | £14,400/year | £22,400/year |
| Moderate | £31,300/year | £43,100/year |
| Comfortable | £43,100/year | £59,000/year |
These figures assume you own your home outright. A minimum lifestyle covers basic needs but leaves little room for extras. A moderate lifestyle includes a two-week European holiday each year and some leisure spending. A comfortable lifestyle includes regular longer holidays, a newer car, and more generous spending.
The State Pension
The State Pension forms the foundation of most people’s retirement income. For the 2025/26 tax year:
- Full new State Pension: £230.25 per week (£11,973 per year)
- You need 35 qualifying years of National Insurance contributions for the full amount
- You need at least 10 qualifying years to receive any State Pension
- Current State Pension age: 66 (rising to 67 between 2026 and 2028)
You can check your State Pension forecast and National Insurance record at gov.uk to see how much you are on track to receive.
Retirement Planning by Age
In Your 20s and 30s
Time is your greatest asset. Thanks to compound growth, even modest contributions in your 20s can grow significantly by retirement. Key actions:
- Ensure you are enrolled in your workplace pension and contributing at least enough to get the full employer match
- Consider increasing contributions by 1% each year or whenever you receive a pay rise
- Take advantage of higher-risk investments that have more time to recover from market downturns
- Check for any old pensions from previous jobs and consider consolidating them
In Your 40s
This is often when retirement planning becomes more serious. With 20–25 years until retirement, there is still time to make a significant difference:
- Calculate your retirement income target using the PLSA benchmarks above
- Review your pension investments to ensure they match your risk tolerance and time horizon
- Consider making additional voluntary contributions (AVCs) if your workplace scheme allows
- Check your State Pension forecast and fill any gaps in your National Insurance record
In Your 50s
Retirement planning becomes urgent. Key actions include:
- Get a detailed retirement forecast from your pension providers
- Book a free Pension Wise appointment to understand your options
- Consider whether you need professional financial advice
- Start thinking about how you will access your pension (drawdown, annuity, or a combination)
- Review your investment strategy – you may want to gradually reduce risk as you approach retirement
In Your 60s
Final preparations for retirement:
- Confirm your State Pension start date and amount
- Decide on your retirement income strategy (see our drawdown vs annuity guide)
- Consider taking professional pension advice for withdrawals
- Plan your tax-free lump sum and how you will use it
- Think about part-time work or phased retirement as a transition
How to Access Your Pension
From age 55 (rising to 57 from April 2028), you have several options for accessing your defined contribution pension:
| Option | How It Works | Best For |
|---|---|---|
| Tax-free lump sum | Take up to 25% of your pot tax-free | Everyone – this is usually worth taking |
| Income drawdown | Keep your pension invested and draw a flexible income | Those who want flexibility and control |
| Annuity | Buy a guaranteed income for life | Those who want certainty and security |
| Lump sums (UFPLS) | Take lump sums as needed (25% of each is tax-free) | Those with smaller pots or irregular needs |
| Combination | Mix of the above options | Most people – flexibility with some security |
Common Retirement Planning Mistakes
- Starting too late – every year you delay costs you in lost compound growth
- Only contributing the minimum – the auto-enrolment minimum of 8% (including employer contributions) is unlikely to provide a comfortable retirement
- Ignoring fees – a 1% difference in annual charges can reduce your pension pot by over 25% over 30 years
- Not claiming full tax relief – higher-rate taxpayers need to claim extra relief through their tax return
- Cashing in your pension too early – withdrawing your entire pot at 55 leaves decades without retirement income
- Underestimating how long retirement lasts – a 65-year-old today has roughly a 1 in 4 chance of living to 95