How much should I have in my pension?

Retiring can be an exciting milestone. But how much should you have in your pension before you’re financially ready to retire?

Everyone’s situation and goals are different, so there’s no single answer. Looking at benchmarks such as average pension savings and recognised retirement income standards can help you review your progress.

In this guide, we explain the key factors that may influence how much you need in your pension. We’ll also look at average pension savings in the UK and what different retirement income levels could mean for your lifestyle in later life.
 

Average pension savings in the UK

Looking at average pension savings in the UK can be a useful starting point for anyone planning for retirement.

According to data from the Office for National Statistics (ONS), the average private pension pot for people aged 55–64 is around £137,800. This figure includes people with a range of incomes and savings. Everyone’s retirement needs and circumstances are different, so think of averages as a useful reference point rather than a target.

The type of pension you have may affect the income you have in retirement. In the UK, there are two main categories of pension: defined contribution pensions and defined benefit pensions. We’ve briefly explained the difference below, but it’s worth doing your own research to understand your pension scheme.

Defined contribution pensions:

• These can be set up through your employer or arranged privately.

• Contributions can be made by you, your employer, or both (employer contributions typically apply to workplace pensions).

• The value of your pension can go up or down depending on investment performance.

• In many cases, you can take up to 25% of your pension as tax-free cash, subject to an upper limit currently set at £268,275. Rules can vary between providers.

Defined benefit pensions:

• These are usually workplace pensions arranged by an employer.

• The retirement income you receive depends on the rules of your specific pension scheme. For example, factors such as your salary and length of time at a company may influence how much you get.

• This type of pension scheme pays a regular income when you reach retirement age.

If your life expectancy is less than a year, you may be able to take more money from your pension tax-free. Check with your pension provider to understand your eligibility.
 

How much should I have in my pension by age?

Pension savings vary widely depending on income, career breaks, housing costs and other financial priorities.

MoneyWeek summarised ONS data on the average private pension wealth across different age groups from 2020 to 2022. This includes people with private pension wealth but excludes those without any pension savings.

Remember, these figures can provide helpful guidelines, but they may be skewed by individuals with below- or above-average savings.

For example, people often wonder how much you should have in your pension at 50. The data suggests the average pension pot for people in this age group is around £80,000. But this isn’t the most suitable amount for everyone. Many people will have more or less in their pension pot depending on their goals and circumstances.

So, if your current savings fall below national averages, that doesn’t necessarily mean you’re behind. Your State Pension, property assets, investments and other savings can all contribute to your final retirement income. How much you need depends on the age you plan to retire and the standard of living you’d like to maintain in later life.
 

What is a comfortable pension in the UK?

Everyone’s definition of a ‘comfortable pension’ is different. The income you’ll need during retirement will depend on your lifestyle, housing costs and personal circumstances.

The Retirement Living Standards were developed by Loughborough University and the Pensions and Lifetime Savings Association (PLSA) to help people understand how much they might spend in later life. These standards outline three levels of retirement lifestyle for individuals and couples: minimum, moderate and comfortable. While your personal living expenses may vary, these estimates can help you assess whether you’re on track for the retirement you hope for.

For a single person:

Minimum — £13,400 a year
At this level, you may be able to afford:

• Around £55 a week on groceries. 

• A week-long holiday in the UK.

• Basic home maintenance costs.

• Limited spending on leisure activities, personal purchases and gifts.

Moderate — £31,700 a year
At this level, you may be able to afford:

• Regular meals out or takeaways.

• A small car that you replace every seven years.

• Occasional holidays abroad.

• Higher spending on leisure activities, personal purchases and gifts.

Comfortable — £43,900 a year
At this level, you may be able to afford:

• Higher spending on food and leisure.

• A car replacement every five years.

• A two-week holiday in the Mediterranean.

• More flexibility for hobbies and social activities.

For a couple:

Minimum — £21,600 a year
At this level, you and a partner may be able to afford:

• Around £109 a week on groceries.

• A week-long UK holiday.

• Basic household costs and maintenance.

Moderate — £43,900 a year
At this level, you and a partner may be able to afford:

• Regular meals out.

• A small car that you replace every seven years.

• A three-star Mediterranean holiday.

Comfortable — £60,600 a year
At this level, you and a partner may be able to afford:

• Higher spending on food and leisure.

• A car replaced every five years.

• A four-star Mediterranean holiday.

If you’re calculating how much you should have in your pension based on the Retirement Living standards, it’s important to factor in inflation.

The rising cost of living can affect the purchasing power of your savings over time. So, if you want to plan ahead for a stress-free retirement, you may consider speaking to a financial adviser.
 

Get your retirement ready with Key

Understanding how much you may need for a comfortable retirement can feel challenging, especially when comparing different benchmarks and income targets.

Reviewing your pension savings, expected retirement age and other financial resources can help you understand how prepared you may be for later life. Speaking with a qualified financial adviser may also help you explore the options available based on your circumstances.

At Key, our advisers take time to understand your plans before discussing the later life options that may work for you. Get in touch with the team to learn more about our approach and why people choose Key.
 

Average pension savings — FAQs

What is the 70% rule for pension?

The 70% rule, sometimes called the 50/70 rule, is a guideline for retirement income. It suggests that you may need around 50% to 70% of your working income each year in retirement to maintain a similar lifestyle.

The exact amount you’ll need will depend on your fixed expenses and lifestyle expectations. Because retirement planning is highly personal, speaking with a qualified financial adviser can help you understand what income level may suit your circumstances.
 

What is the average pension pot in the UK at 65?

According to the Office for National Statistics (ONS), the average pension pot for people aged 65–74 in the UK is around £145,900. However, pension savings vary widely and many people will have more or less than this amount. So, these figures should be seen as a general guide rather than a target. A financial adviser might be able to help you set a realistic and appropriate target for your savings.
 

Why is my pension lower than others?

Pension savings can vary significantly between individuals. Factors such as career breaks, self-employment, salary levels, contributions and investment performance can all affect how much you save. Housing costs, savings and other financial assets may also influence retirement income.

It’s important to remember that there’s no single definition of a ‘comfortable retirement’. While your pension may be lower than others, it may still be enough to support you. If you’re unsure of your position, speaking with a qualified financial adviser can help you review your retirement plans.