Revealed: how much do you really need to save to enjoy a comfortable retirement?

Understanding how much money you will need to afford the retirement you want is crucial for effective planning. Whether you want to travel the world, treat your family, or take up a new hobby, the savings you build up now will determine whether you’re able to achieve your goals.

So how much do you really need to save to be able to afford a comfortable retirement? And if you’re not quite on track to hit this target, what can you do to boost your current retirement savings? Read on to learn more.

A single person may need £645,000 in their pension pot to afford a comfortable retirement

Research from Quilter has revealed that a comfortable retirement could now require a pension pot of £645,000 for a single person. This equates to an annual income of £26,700 a year net of tax, on top of the State Pension. The State Pension for 2023/24 is £10,600 a year.

The calculations were based on data from the Pensions and Lifetime Savings Association’s (PLSA) Retirement Living Standards research, which is designed to help savers to understand what their retirement could look like and how much they will need to save.

The data was updated to account for the rising cost of living.

Data also showed how much you may need to save for minimum or moderate lifestyles

The PLSA has definitions for a “minimum”, “moderate”, or “comfortable” lifestyle to help you plan effectively and understand what your retirement could look like.

These figures assume that you are living rent- or mortgage-free in your home. So, it’s possible that costs could be higher in the future as a result of rising house prices and a greater number of people renting or buying into later life.

It also does not account for any later-life care fees that might be needed.

Everyone’s circumstances and long-term goals are different though, so working with a financial planner is a great way to understand how much you will need to save for your retirement.

5 ways to supercharge your pension today

If you’d like to take some additional positive steps to increasing your pension savings in light of the new findings, here are five tips that you could do today.

1.  Track down lost pensions

Since auto-enrolment began in 2012, you are likely to have been enrolled in a workplace pension for each company you’ve worked for since then. This means that, if you’ve changed jobs in that time, you might have one or several pensions that you are no longer contributing to.

It’s a good idea to make sure you have the contact or login details for each pension you own so that you can keep track of how much you have saved. If you’re unsure how to find your old pensions, you can use this tool on the government website to track down the contact details.  

2.  Consider consolidating your pensions

If you have a few different pensions, consolidating them into one pot might be worth considering. Depending on the fee structure, for example, this could help you to reduce the amount you pay in fees on your pensions.

However, this is not suitable for everyone, so make sure you speak to your financial planner if you’re considering this.  

3.  Increase monthly or annual contributions

Thanks to the power of compounding, increasing your annual contributions to your pension, even by just 1 – 2% could allow you to build a substantially larger final sum than you may be on track for currently if done early enough.

This will apply to any amount that you are able to contribute though, so even if you’re not able to increase your contributions remember that each deposit into your pension is likely to snowball over time.

4. Claim the correct amount of tax relief

If you pay higher- or additional-rate tax, you should claim tax relief on your pension contributions on your self-assessment tax return.

Tax relief may be applied automatically if your employer takes your contributions from your pay before tax, and if you pay the basic rate of tax on your income. This is known as “relief at source”.

However, if you pay higher- or additional-rate tax, you can claim further tax relief of:

• 20% up to the amount of any income you have paid 40% tax on

• 25% up to the amount of any income you have paid 45% tax on.

By claiming all of the tax relief that you are eligible for, you can ensure that more funds are added to your pension pot without any additional cost to you.

5.  Review how your pension is invested

Making contributions is only one piece of the puzzle when it comes to growing your pension – you also need to consider how those funds are being invested.

Depending on your pension provider, you may have a few different options to choose from. But usually it’s wise to consult your financial planner to decide how you should be investing your pension to have the potential to secure the returns that you need.

Taking the right level of risk and putting your savings into the right types of investments can make a big difference to the final sum of your pension.

Get in touch

If you’d like to learn more about how much you might need to save for retirement and avoid retiring without the necessary funds, we can help. Email theteam@fortitudefp.co.uk or call us on 01327 354321.

Please note

A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future results.

The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates and tax legislation may change in subsequent Finance Acts.