05 SEP 2025
What size pension pot do I need?
By Nigel Danzelman, Head of Marketing Services & Communications
When you’re in your 20s and 30s it’s hard to imagine how much money you might need to save for your retirement. It can also seem so far into the future that it’s tempting to direct your financial efforts towards more immediate concerns, like mortgages, or starting a family.
However, that can be a dangerous trap to fall into. The type of retirement lifestyle you can expect to lead depends to a large extent on the size of the pension pot you have saved during your working life. And the size of the pot you’ll need is much more than most people imagine.
According to the OECD, the average man can expect to enjoy 18.4 years of retirement, while the average woman can expect 22.8 years of life after work. That is a lot of years to fund. And it’s even more if you expect to retire early.
So how big a pot do you need? And what kind of retirement will a £250k, £500k and £750k pension pot allow you to afford?
How big a pot do I need when I retire?
There is no one-size-fits-all answer here. People who’ve scrimped and saved all their lives may envisage a more lavish lifestyle in retirement. High-earners may have more modest spending intentions in their retirement years.
However, most people will hope to maintain (or see only a marginal reduction in) the standard of living and general lifestyle they’ve enjoyed during their working lives.
In fact, a survey conducted by International Adviser and IFGL Pensions discovered that 53% of people expected to maintain their lifestyle in retirement, with around a third expecting just a slightly lower standard of living.
So how much might you need to maintain the lifestyle you’ve become accustomed to?
There are a number of different ways of estimating this. Please be aware these are only rough guides that give an indication of the numbers you might be looking at and assume that you retire at the state retirement age (currently 66 in the UK, rising to 67 in 2028).
Speak to your financial adviser to get a more detailed picture and to discuss your own personal situation and aspirations.
50/70 rule
A rule of thumb used by some is that your annual pension income should be between 50% and 70% of your final (gross) salary. So if you were earning £100k when you retired, you will need a pension that provides an income of £50k to £70k a year.
4% rule
Also popular for giving an indication of what you’ll need is the 4% rule. This is based on the value of your total pension pot and withdrawal rate. Imagine you have a pension pot worth £1 million. If you withdrew 4% of that in your first year of retirement, it would provide an income of £40k.
25x rule
Another way of looking at this is to multiply the annual income you will want in your retirement by 25 to determine the size of pension pot you’ll need. So if you expect a £30k annual income, multiply £30k by 25 to get the size of the pot that will be needed - £750,000.
10 x final salary rule
Yet another guide is to multiply your final (full-time) salary by 10. So if you retired with a salary of £60,000, you might require a pension pot of around £600,000.
Don’t forget to include the State Pension
If you have a UK State Pension, you can add this into pension pot calculation. A full UK State Pension is currently worth £11,973 each year (2025-26 tax year). If you had to save the money to ‘buy’ this income yourself, you would currently need over £222,000 per person*.
Remember to add these numbers into your retirement calculations.
*based on best buy annuity rates September 2025 for a person aged 65, purchasing a single life annuity, escalating by RPI, with a 5 year guarantee period. Annuity rates fluctuate based upon a number of factors, and the cost to secure a set level of income will therefore change over time. Annuity Rates: View Best Annuity Rates from the UK Market
How big a pension pot will I need for a basic, moderate or comfortable retirement?
The Pension and Lifetime Savings Association has developed three “retirement living standards” to help give us a picture of what different types of retirement look like, and the cost of each one.
Each of the three retirement scenarios assume the people are home-owners who have fully paid off their mortgage and have no debt.
The lifestyles are defined as Minimum, Moderate and Comfortable. They have defined what these retirements “look like”, and costed the annual income needed to fund each different lifestyle.
The annual costs for each retirement type are as follows:
| Retirement lifestyle | Single-person annual income | Couple annual income |
| Minimum | £13,400 | £21,600 |
| Moderate | £31,700 | £43,900 |
| Comfortable | £43,900 | £60,600 |
If we express these using the 4% (or x 25) rule, the overall size of the pots required to fund each lifestyle is as follows. (Please note this is a guide only):
| Retirement lifestyle | Single-person annual income | Couple annual income |
| Minimum | £335,000 | £540,000 |
| Moderate | £792,000 | £1,097,500 |
| Comfortable | £1,097,500 | £1,515,000 |
Lifestyle definitions
So what kind of retirement will each of these different lifestyle scenarios look like? Again, these have been defined by Retirement Living Standards and provide a quite detailed picture of what we’ll be able to afford. It’s obvious, but worth remembering that the more lavish your retirement lifestyle, the more money you will need.
The table is based on a 2-person household and assumes they are home-owners with no mortgage outstanding.
| Minimum | Moderate | Comfortable | |
| Two person household | £21,000 a year | £43,900 a year | £60,600 a year |
| What standard of living could you have? | Covers all your needs, with some left over for fun | More financial security and flexibility | More financial freedom and some luxuries |
| House | DIY £200 a year to maintain condition of your property. | £500 a year to maintain condition of your property, £300 contingency. | £600 a year to maintain condition of your property, £300 contingency. |
| Food | Around £109 a week on groceries, £60 a month per household on food out of the home, £24 a month per household on takeaways. | Around £103 a week on groceries, £63 a week per household on food out of the home, £21 a week per household on takeaways, £106 a month to take others out for a monthly meal. | Around £134 a week on food, £85 a week per household on food out of the home, £32 a week per household on takeaways, £105 a month to take others out for a monthly meal. |
| Transport | No car, free bus pass, £30 per month to cover two taxi trips, £180 per year per person to cover 3 rail fares. | 3-year-old small car, replaced every 7 years, £22 a month on taxis per household, £104 a year on rail fares per person. | 3-year-old small car, replaced every 5 years, £22 a month on taxis per household, £208 a year on rail fares per person. |
| Holidays & Leisure | A week long UK holiday. TV license and broadband plus a streaming service with ads. £20 a week per person for activities. | A fortnight 3* all-inclusive holiday in the Med and a long weekend off-peak break in the UK with £321 spending money. TV license and broadband plus two streaming services. £43 a week per person for activities. | A fortnight 4* half board holiday in the Med with around £100 per person per day spending money and 3 long weekend breaks in the UK with £400 spending money per break. Extensive bundled broadband, movie and TV entertainment subscription. £54 a week per person for activities. |
| Clothing & Personal | Up to £450 for clothing and footwear each year per person. | Up to £1,548 for clothing and footwear each year per person. | Up to £1,548 per person for clothing and footwear each year. |
| Helping Others | Twelve gifts of £20 for birthdays and the same amount for 12 Xmas presents. | Twelve gifts of £30 for each birthday and the same amount for 12 Xmas presents, £200 per household a year for charity donations. £1,000 for supporting family members e.g. paying for grandchildren activities, treats, trips etc. | Twelve gifts of £50 for each birthday and the same amount for 12 Xmas presents, £300 per household a year for charity donations. £1,000 for supporting family members e.g. paying for grandchildren activities, treats, trips etc. |
Source: Retirement Living Standards, 2025
Other ways to fund your retirement
Of course your pension (and UK State Pension) may not be the only way to fund your retirement. Here are some other common ways to supplement your pension pot.
Down-sizing
Many people have seen the value of their home increase in value over the years, and in most cases will be the largest single asset you own. Where this was once a family home, and the children have now fled the nest, there may well be an opportunity to down-size and use the balance left after buying a smaller (and cheaper) property to fund your retirement spending.
As well as a house, some people may have other assets that they may choose to sell once they are retired.
It’s worth noting that down-sizing doesn’t always release as much money as people expect, once costs like legals, stamp duty and moving costs are taken into account.
Equity release
An option which allows you to remain in the same home, whilst releasing some of the equity value to spend during your lifetime, equity release has increased in popularity in recent years.
This won’t suit everyone, as it will mean less inheritance to pass down to future generations, but can be a useful option for those whose wealth is tied up in bricks and mortar.
Equity release also involves costs, and specialist advice from a suitably qualified financial adviser should always be sought if exploring this option.
Inheritance
Many of us might expect to inherit a sum of money from our parents or other relatives or friends during our retirement. While this cannot be counted on (or predicted as to when it will happen) inheriting money can be an important boost to your retirement savings.
Other savings
Many people build up other savings, ISAs or investments during their working lives that can be drawn down in retirement to supplement their retirement income. Your financial adviser will be able to help you plan the most efficient way to access your savings, pensions and other assets to help fund your retirement dreams.
Working
Many people choose to return to work in retirement, often in a part-time capacity. This can be an important way to supplement your retirement income.
Of course retirement is not just about the money. However, setting realistic saving goals and understanding what lifestyle you’ll be able to afford are crucial in determining when – and how – you retire. Planning early with your financial adviser can pay huge dividends – both financially, and in terms of confidence that your retirement plans are sound and will deliver the lifestyle you are looking for.