Use our calculator to work out your likely monthly income during retirement - and the total value of your pension pot.
This is the number one question asked of Financial Advisers – and for good reason.
For most people, the aim is to retire as soon as possible. But you also want to ensure that you can retire comfortably, so that you can enjoy a good standard of living for as long as you live.
There are many factors to consider, including things it’s not possible to know for sure in advance (such as future inflation rates, and how long you’ll live). However, by using details that you do know, it’s possible to gain a more clear picture of when you could afford to retire.
Here’s how:
1. Identify much you’ll need to live on each year as a retiree.
This is, of course, something that will be personal to you. If you don’t already have a vision in your mind of the kind of lifestyle you’d like in retirement, now’s the time to think about it, before attempting any other calculations.
Add together your estimated basic living costs as a retiree (for example: housing, food, utility bills) plus the non-essential costs you’re likely to incur. That could include the cost of your hobbies, transport, or travel, for example. And don’t forget to include any one-off expenses (such as the cost of relocation to a new part of the country, renovations to your home, or helping out your children/grandchildren) that you intend to fund from your retirement savings.
If you’re struggling with this, the average amount considered ‘comfortable’ per year during retirement in the UK is currently:
However, it’s important to remember, this is just a ballpark figure. Your total will be unique to you and based on the kind of lifestyle you’re currently accustomed to and what you want to experience in retirement.
2. Discover how much you have saved already – and how much it may grow over time.
To work this out, you’ll need to factor in:
If you need help tracking down your old or lost pensions, use our Pension Finding Service.
3. Think about how long your money will need to last
This is tough, because none of us have a crystal ball. If you live to the grand old age of 100 and spend 40 years in retirement, you’ll clearly need a lot more in savings than you would need to cover a retirement that only lasts 15 years.
For reference, the average length of retirement for a UK male is 17 years. For females, it is 20 years.
Now, divide the total you already have (or that you’re projected to have at some point in the future) by the amount you expect to spend to maintain your desired lifestyle in retirement. How many years does that total pot last for? If it’s not as many years as you think you’ll be alive, then you either need to work for longer before starting retirement, increase the size of your monthly pension contributions, or perhaps think about a way to further supplement your income in retirement. The other option is swap your pension to a fund that you think will perform better over the coming years. Want to see which funds have historically performed best? Use our Pension Performance Checker.
A final note – This is a fairly simplistic way of looking at retirement planning. It doesn’t factor in things like the effects of inflation (more on this further down the page), or your changing needs and costs as you age. We recommend seeking help from a retirement specialist Financial Planner for more sophisticated forecasting advice, particularly if your situation involves valuable assets or complicated circumstances.
The answer to this question will largely depend on your age right now, and what kind of retirement lifestyle you want to enjoy.
The younger you are, the more years you will hopefully have to spend in retirement, but the larger the pot you will need to sustain you.
Similarly, the more you plan to spend in retirement, the more you’ll need put away to begin your post-work life. (Alternatively, you’ll need an additional source of income during retirement.)
The average amount considered ‘comfortable’ per year to fund retirement in the UK is between:
The Pensions and Lifetime Savings Association (PLSA) also did some work in 2023 on average annual retirement living standards, designed to help people picture what kind of lifestyle they can afford in the future. The following are based on their analysis of a single person living outside of London:
However, it’s important to remember with the above estimates that these are just best-guesses, based on averages. Always be led by your specific needs, goals and ambitions for retirement, and plan accordingly.
Next, you’ll need to multiply that by the number of years you expect to spend in retirement. For most of us, that’s something we can’t predict, in which case be led by average life expectancy. For a male in the UK, it’s 79 years, and for females, it’s 83 years.
This is a fairly simplistic way of doing the calculation, but it will give you a rough estimate of the total you will need to fund retirement.
That very much depends on how you choose to live in retirement. If your plans involve trips abroad, cruises, eating out or taking up new hobbies then your costs will be higher than a retirement spent living more frugally. For many people, retirement is the reward for decades of hard work and is a chance to enjoy new experiences. Whatever your dreams for this part of your life, you don’t want it to be dogged by money worries, so working out, in advance, how much you’ll need to fulfil your plans means you won’t be disappointed.
Start by looking at your likely basic living expenses – and remember these might not be the same as when you were in work. Your travel costs may reduce, for example, if you’re no longer having to commute to work everyday. Your energy costs, however, may rise if you’re at home more than you were previously. Once you have a rough estimate of your basic costs, think about the additional extras you will need to budget for. This could be the costs of overseas travel and holidays, new hobbies or the costs of moving if you plan to relocate.
What people sometimes forget is that how you live will change as you age. So the early part of your retirement may be very busy and have more costs associated with it, whereas later retirement years are likely to be less active, although there are other costs, such as the possible cost of care, associated with it.
If you’re not sure how to budget for retirement, speak to a Financial Advisor or Planner who specialises in retirement planning. They will help you nail down how much you will need to have saved.
If you’re just looking for a ballpark figure at this stage, then the average annual UK retiree budget is:
However, it’s important to remember, this is just an average. Be led by your plans and expectations. Ask yourself if you would be happy to experience a drop in living standards in retirement and if not, what you consider a comfortable amount now.
Inflation!
There is one other factor to consider: inflation. Changes in inflation don’t directly affect how much you have in your pension pot, but they can have an impact on its relative value (i.e. what you can afford).
Inflation can be tricky to plan for, but there is a helpful rule of thumb here: the 4% rule.
The 4% rule says that if you withdraw 4% of your retirement pot in your first year of retirement, then increase the amount for each year that follows by the rate of inflation for that year, then your money should last you about 30 years.
So if you retire with £500,000, you’d:
To be clear – with this method of calculation, you don’t keep withdrawing just 4% of the portfolio balance every year. Instead, you’re aiming to ensure you maintain your purchasing power by spending the same, inflation-adjusted amount every year.
To work this out simply, you need to divide your total pot amount by the amount you predict you’ll need to fund your retirement per year.
So, if you have £750,000 in your retirement fund, and you think you’re going to need £30,000 per year throughout retirement, then you’ve probably got enough to sustain your desired lifestyle for 25 years.
Don’t forget to include your State Pension in this calculation. It’s paid in addition to your private and workplace pension withdrawals. So if wanted a yearly income of £30,000 in the current tax year, you’d only need to draw down £18,027 from your personal retirement pot, as it will be subsidised by your State pension to the tune of £11,973 (if you were eligible to receive the full State Pension). If you want some help working out what you’ll be entitled to, the UK government provides a free State Pension forecasting service here.
That’s the simple way to work it out.
There are two factors however that slightly complicate the calculation: inflation and growth. The bad news is that inflation will eat away at your spending power, but the good news is that investment returns (plus future increases in the State Pension) can more than compensate for those losses. That makes it even more important that:
You are happy with the returns you are receiving on your pension savings.
Check out how your pension fund’s performance compares to other funds with our industry-leading Pension Checker Tool.
You are not paying too much in fees for your pensions.
Fees can eat away at your retirement savings, and even small differences in annual charges can make a huge difference over 20 years, especially once compound interest is factored in. Check you’re not paying too much for your pension with our SIPP Cost Comparison Calculator.
With good planning, you’ll hopefully never find yourself in this situation. However, if this scenario does arise, you do have some options.
The first and most important thing to do is evaluate your spending — and reduce it where you can.
Gain a clear picture of where your money has been going. Lay it all out and then identify if there are any areas you could make easy wins: i.e. cut-backs that don’t affect your quality of life too much. These are things like changing energy suppliers, reviewing your insurance plans, and cancelling any unused subscriptions.
If that isn’t possible, or those changes aren’t enough on their own, then you might need to make some tougher decisions. That could mean looking at cutting back on holiday plans, downsizing, renting out a room, or releasing equity from your property.
If you own your home, it’s a major resource. However, releasing equity through a product such as a lifetime mortgage is a big decision with long-term implications. So seek independent advice from a suitably qualified professional before deciding whether to pursue this path.
Consider returning to some form of paid work
‘Unretiring’ is becoming increasingly common, and more age-friendly employers and flexible roles are available now than ever before.
Of course, it must be something that works for your health and wellbeing. Most people returning to work in retirement do so part-time, or in some form of freelance or consulting capacity. There are other options too such as short-term, seasonal positions over the busy Christmas period.
Alternatively, you could consider turning your hobby into a source of income. This may be ideal if you only need a modest income to ease the pressure on your savings.
Check your eligibility for state support
Make sure you’re not missing out on any benefits or support. It’s particularly important to check this if your income drops as you could find this makes you eligible for benefits you weren’t previously able to receive such as the Winter Fuel Payment. Age UK, Turn2Us and Citizens Advice Bureau can all help you identify what you may be eligible to receive.
Tap into other assets
Do you have any ISAs or forgotten pensions you could draw money from? Or any valuables you could sell that will help bridge the gap between how much you have and how much you need?
Revisit your investment and savings strategy
Are you keeping too much of your wealth in cash, for example? If interest rates aren’t keeping pace with the rate of inflation, then you’re losing money in real terms. Investing in assets that grow faster than inflation, on the other hand, protects your purchasing power.
Of course, you don’t want to expose your money to high levels of risk during retirement, but that doesn’t rule out investing altogether. There are more ways to invest than ever before, including options that still open up the potential for higher returns, but with very little risk such as Money Market Funds.
Consider buying an annuity
An annuity is a financial product you can buy with your pension pot (or other savings) that gives you a guaranteed income for life or for a fixed period.
So instead of taking out chunks of your pension as you need it (‘income drawdown’), you exchange some or all of it for a regular income.
It’s a more secure and predictable way to fund retirement, so it’s good for people who want certainty, but there are some downsides: Once you buy one, you can’t usually change your mind — it’s a one-time purchase; If you die early, the insurer may keep what’s left (unless you have a guarantee period or joint life); And returns can be lower compared to income drawdown or investing — especially if interest rates are low.
One thing that’s clear is that the earlier you spot the problem (or potential problem), the more choices you’ll have. So don’t delay taking action if you think your finances are heading in the wrong direction.
You have two options when planning your finances for retirement: either seek the help of a professional – a Financial Advisor or Financial Planner who specialises in retirement planning – or go it alone.
While there are many benefits to using a qualified professional (for example, peace of mind that a trained expert is overseeing your finances, and access to sophisticated financial planning tools), Financial Advisors come at a cost and often only provide services to those who have a high net worth (e.g. a pension and assets worth more than £500,000).
So, what is available if you don’t choose to – or can’t – pay for the services of a professional retirement planner?
The good news is that there are plenty, and we’ve listed them below! The even better news is that you shouldn’t need to pay anything to access them in most cases.
Lets you see how much State Pension you’re likely to receive, when you can claim it, and if there are any ways you can increase it.
Investing Insiders Pension Calculator
Use our calculator (at the top of this page) to work out your likely monthly income during retirement based on any personal pensions or workplace pensions you have plus your State Pension forecast. It also calculates the total predicted value of your pension pot at retirement.
MoneyHelper (from the Money and Pensions Service)
MoneyHelper offers free and impartial guidance on pensions, savings, budgeting, and debt.
Tools include: A pension calculator so you can estimate your retirement income; A budget planner to help you manage your day-to-day expenses; A savings calculator to help you set savings goals and achieve them.
Pension Wise (part of MoneyHelper)
Offers free 45–60-minute appointments with pension specialists for people aged 50+ with a defined contribution pension. Helps you understand your options at retirement.
Age UK Retirement Planning Tools
Age UK offers guidance on pensions, equity release, and budgeting in retirement. They don’t offer calculators but provide practical, easy-to-understand guides.
Which? Retirement Income Calculator
Helps you model how long your savings will last, and the impact of different withdrawal amounts, which is useful if you’re planning on managing your own drawdown pension.
Investing Insiders Workplace Pension Checker
Is your pension growing as fast as it should be? Discover if your pension fund is performing as well as other funds, and if not, where you could be getting better returns to fund a higher standard of living in retirement.
Need to track down your lost and old pensions? We’ve partnered with Gretel, the fastest and easiest pension tracing service in the UK, to help you find your missing pots. It’s free and takes just a few minutes.
