Saving for retirement is something many people put off, especially when more immediate financial pressures take priority. But with pensions, starting early makes a significant difference — the earlier you begin, the less you need to save each month to achieve the same outcome.
Understanding spending in retirement
To work out how much you need to save, you first need to understand what your spending is likely to look like. This varies from person to person and depends on the lifestyle you want.
Spending also changes throughout retirement. Early retirement often includes more holidays, eating out, and hobbies, while later years may involve higher spending on utilities, insurance, and health-related costs.
The latest PLSA Retirement Living Standards (2024/25) provide a clear benchmark for couples:
- Minimum lifestyle: £22,400 per year
- Moderate lifestyle: £43,100 per year
- Comfortable lifestyle: £59,000 per year
Sources of income in retirement
For most people, the State Pension forms the foundation of retirement income. The State Pension age is currently 66, rising to 67 between 2026 and 2028.
For those reaching State Pension age after 6 April 2016, the full new State Pension is £221.20 per week, equivalent to £11,502 per year (2024/25).
A couple who both receive the full State Pension would therefore receive £23,004 per year combined.
Additional income may come from:
- Defined benefit (final salary) pensions, which pay a guaranteed income based on salary and years of service.
- Defined contribution (money purchase) pensions, where your pot depends on contributions and investment performance.
With defined contribution pensions, most people choose either:
- An annuity — a guaranteed income for life, or
- Income drawdown — flexible withdrawals while the remainder stays invested.
How much do you need in your pension pot?
Assuming that a married couple has the full State Pension entitlement, and no Final Salary pensions, their pot needs to be able to provide income either by buying an Annuity or using Income Drawdown.
Annuity requirements
For a couple aged 66 in good health:
| Lifestyle | Income needed from annuity | Required pot
(inflation protection) |
Required Pot (level payment) |
| Moderate (£43,100/year) | £20,096 | £502,000 | £323,000 |
| Comfortable (£59,000/year) | £35,996 | £900,000 | £581,000 |
Annuities on a joint‑life basis, with a 50% spouse’s benefit and a 10‑year guarantee. Inflation protected annuity rises with RPI.
Drawdown requirements
With drawdown, your money remains invested while taking withdrawals and, therefore, can potentially benefit from investment growth.
| Lifestyle | Income needed from Drawdown | Required pot
|
| Moderate (£43,100/year) | £20,096 | £575,000 |
| Comfortable (£59,000/year) | £35,996 | £1,030,000 |
Assuming:
- 3% real investment growth
- 3.5% sustainable withdrawal rate
- Life expectancy to age 94
Source: FCA Retirement Income Market Data 2024 https://www.fca.org.uk/data/retirement-income-market-data
Source: UK Annuity Rates (2025–2026) — Retirement Line & UK Pension Annuity Guide https://www.retirementline.co.uk/annuity-rates/ https://www.pensionannuity.co.uk/annuity-rates/
How much do you need to save?
Based on the figures above, it is possible to calculate what a couple would need to save each month to achieve a comfortable retirement (£59,000 per year including State Pension).
The calculations assume basic rate taxpayers, with an annualised 4% growth rate net of charges, and cover those who are just starting out on their journey to pension savings and those who have amassed some pension funds already, retiring at age 67.
|
- For a couple aged 30 with no pension savings, they would need to save £990 each month between them into a pension for a comfortable retirement or £800 per month if they already have a pension pot of £50,000.
- If the same couple delayed their retirement planning for a further 10 years, this would increase their monthly combined contributions from age 40 to £1,900 a month, assuming they had no previous pension provision.
The figures for a luxurious retirement are, understandably much higher.
While these figures may seem daunting, many people already contribute through workplace pensions, and contributions typically rise with earnings. Starting early remains the most effective way to reduce the monthly cost.
How can we help?
Zoe Till is a Partner and Chartered Financial Planner in our expert Independent financial advisers team. Zoe’s areas of expertise include investment advice, retirement planning, IHT and lifetime cash flow modelling.
If you would like any advice concerning the subjects discussed in this article, please get in touch with Zoe or another member of the team in Derby, Leicester, or Nottingham on 0800 024 1976 or via our online form.
Contact usIf this article relates to a specific case/cases, please note that the facts of this case/cases are correct at the time of writing.