How Much Pension Do I Need?

A target pot is worked out backwards from the income you want. The 4% rule, derived from the Trinity Study, takes 4% of the pot in the first year and raises the amount with inflation after that, which historically gives a high probability of the money lasting 30 years. Wanting £20,000 a year from drawdown therefore points to £20,000 divided by 0.04, which is £500,000. An annuity converts pot into income directly instead. At the 5.5% starting rate the calculator uses for an income that rises each year, the same £20,000 needs £363,636. A level annuity paid up to about 8.2% for a healthy 65-year-old in September 2026 (MoneyHelper figures via Which?), so it needs about £245,000, but the income never rises.

The State Pension does part of the job for you. A full new State Pension of £241.30 a week, £12,547.60 a year in 2026/27, reduces what your own savings have to produce, so a target of £25,000 a year leaves the private pension responsible for £12,452.40. That works out at £311,310 at a 4% drawdown rate, or £226,407 bought as a rising annuity at 5.5%. The distance between those two figures is why the choice of income method matters nearly as much as the saving itself.

Working back to today needs three further inputs: what you have saved already, how many years you have, and what growth to assume. A balanced portfolio is usually modelled at 5% nominal, and the future value of an annuity formula turns the target into a required monthly contribution. Charges come off the top, so a 5% gross return with 0.5% of charges leaves 4.5% net, and half a point compounds into a large difference over 30 years.

Pensions UK (formerly the Pensions and Lifetime Savings Association) publishes Retirement Living Standards, which give the target some shape. Its June 2026 update puts the minimum standard at £13,900 a year for a single person and £22,500 for a couple, covering essentials only. The moderate standard is £32,700 and £45,400, adding an annual holiday and hobbies. The comfortable standard is £45,400 and £62,700, with multiple holidays and a replacement car every 5 years. These are after-tax figures. For a single person, reaching moderate alongside a full State Pension takes a pot of roughly £370k to £500k, while comfortable takes £600k to £820k. Most UK retirees have under £100k saved.

One rule of thumb halves your starting age to give the share of salary to put away. Beginning at 25 means 12.5%, at 35 means 17.5%, and at 45 means 22.5%. With an employer match of 3 to 5% in the mix, your own contribution needs to be 7.5 to 19.5% on top of that. The State Pension alone replaces about 25 to 30% of average UK earnings, so anyone aiming to replace 70% of pre-retirement income needs workplace and personal pensions to cover 40 to 45%, which takes 15 to 20% of salary over 40 years.

Starting early does more work than saving hard later. £100 a month from age 25 at a 7% real return reaches £262k by 65. The same £100 a month begun at 35 reaches £121k, and from 45 only £52k, so each decade of delay roughly halves the result. Across 30 years, growth accounts for more than 70% of the final pot, which is why doubling contributions late in a career cannot recover the ground that early money would have covered on its own.

The pot then has to survive being drawn down. A sustainable rate of 3.5 to 4% a year is the usual planning assumption, so £400k supports £16k a year for 30 years before the State Pension is added on top, which lands a single retiree between the minimum and moderate standards. Couples, and anyone stopping at 60 and planning for 35 years to age 95, should pull the rate back towards 3%, which pushes the pot needed past £600k. The State Pension is the foundation, and private saving is what separates minimum from comfortable.