How Much Do You Need to Save for Retirement?

Pension Awareness Week 2023

Pension Awareness Week (11th-15th September 2023), is the opportune time to focus on one question universally echoed: “How much do I need to save for retirement?” While pensions and retirement planning encompass various aspects, a clear understanding of the figures you need can be the cornerstone of your retirement strategy. It’s important to speak to a financial adviser about your specific circumstances, as generic advice may not suit everyone

Why Is Accurate Pension Planning Crucial?

The significance of robust retirement planning cannot be overstated. Longer life expectancies mean you may need to plan for two or even three decades of life after work. Additionally, factors like market unpredictability and rising care costs constantly change the game. Having an accurate estimate of the funds you’ll require not only offers peace of mind, but also provides a roadmap to achieve your future goals.

Factors Influencing Your Retirement Fund

Expected Lifestyle

What are your aspirations for retirement? Are you planning to travel, pick up some new hobbies, or contemplate frequent social events? All these activities come with a cost. Sketching out a realistic vision of your retirement lifestyle is a good idea to start your plan, as it is a significant determinant in how much you’ll need to save.


The £1 you have today won’t have the same purchasing power in 20 or 30 years. Inflation erodes the value of money over time, affecting everything from food shopping to utility costs. When calculating your retirement savings, it’s essential to factor in a rate of inflation to ensure your money maintains its purchasing power.

Ongoing Debts or Liabilities

If you expect to have debts during your retirement, like an unpaid mortgage, these need to be considered in your savings plan. Debts can significantly impact your monthly budget and, thus, the amount you’ll need to live comfortably.

Healthcare Costs

While the National Health Service (NHS) offers the comfort of covering many basic healthcare needs, it’s essential not to overlook the potential for additional healthcare-related expenses in retirement. Here are some areas to consider:

Long-term Care: Although the NHS provides certain types of long-term care, it doesn’t cover comprehensive residential or nursing home expenses. Means-testing often determines how much financial assistance you can receive, and many individuals find they need to contribute significantly to their care.

Care home fees vary considerably around the country. However, on average you should expect to pay approximately £30,000 a year for a residential care home and £50,000 if you need nursing care [1]. 

Specialist Treatments and Medicines: You might encounter waiting lists or limited availability for some specialised treatments within the NHS. Opting for private healthcare to skip the queues or access specific treatments can be pricey. 

Dental and Optical Care: The NHS does not fully cover dental and optical care for most adults. As these needs often increase with age, planning for them is sensible.

Mobility Aids and Home Adjustments: While basic aids may be available, you may find that advanced equipment or home adjustments like stairlifts are out of pocket expenses.

Including a “healthcare buffer” in your retirement planning can offer you the flexibility and peace of mind to handle these potential costs. 

Retirement Living Standards and Financial Benchmarks

While the rule of thumb is to aim for a retirement income of two-thirds of your final working salary, individual circumstances can require more specific planning.

The Retirement Living Standards, based on independent research by Loughborough University, have been developed to help us picture what kind of lifestyle we could have in retirement [2].

These Standards provide a helpful benchmark for what different lifestyles may cost you in retirement:

Amount Needed For

Single Person


Minimum Retirement*



Moderate Retirement*



Comfortable Retirement*



*For a more detailed breakdown, please visit the Retirement Living Standards website. 

These numbers offer a generalised view and should be adjusted according to your unique circumstances. For a tailor-made plan, consultation with a financial adviser is essential.

Online Tools and the Role of Financial Advisers

While online pension calculators can offer an initial estimate of what you might need, their algorithms cannot capture the full complexity of individual circumstances. They are an excellent starting point, but they are not a substitute for personalised advice from a qualified financial adviser. Financial advisers can evaluate your income sources, existing savings, investment choices, and potential liabilities to offer a holistic retirement plan.

Time Is of the Essence

The beauty of compound interest is that it allows your money to grow exponentially, but requires time to work its magic. Starting your retirement savings early can significantly impact the final amount you end up with. It’s much easier to reach your savings goal over 30 years than over 10 or 15. Delaying even a few years can require substantially higher monthly contributions later on.

The Workplace Pension and State Benefits

For many in the UK, the terms “workplace pension” and “state pension” might be familiar, but the intricacies of how they contribute to retirement planning are often less understood. A startling statistic from the Office for National Statistics reveals that nearly one-third of people expect to rely solely on the State Pension in their retirement years [3]. While it’s something, relying only on state benefits may not provide the comfortable retirement you envision. Here’s why adding a workplace pension into your strategy is crucial:

The State Pension

A Basic Retirement Buffer

The State Pension is a regular payment from the government that you can claim when you reach the State Pension age, which is gradually increasing and depends on your birth date. Your eligibility and the amount you’ll receive are based on your National Insurance (NI) contributions throughout your working life.

How Much You Can Get

The full State Pension is currently £203.85 per week [4]. However, the amount you receive depends on how many qualifying years of NI contributions you have. If you have fewer than 35 qualifying years, you will receive a reduced amount. It’s important to regularly check out the Government State Pension website for any updates and changes.

How to Increase Your State Pension Entitlement

There are a few things you can do to increase your State Pension entitlement:

  • Make sure you pay all of your NI contributions.
  • Fill in any gaps in your NI contributions.
  • Take up any opportunities to top up your State Pension, such as the State Pension Credit.

The State Pension and Other Benefits

If your State Pension is not enough to meet your needs, you may also be eligible for other benefits, such as Pension Credit. Pension Credit is a means-tested benefit that can top up your income to a minimum level.

Workplace Pensions

Maximising Retirement Income

In addition to the state pension, you can significantly benefit from a workplace pension.


If you’re eligible, your employer automatically enrols you into a workplace pension scheme. This means both you and your employer will contribute a percentage of your salary to the scheme.

Employer-Matching Contributions

One of the most attractive features of workplace pensions is the employer match. This means your employer will match your contributions up to a certain percentage. For example, if you contribute 5% of your salary, your employer may also contribute 5%. This can substantially boost your pension pot over time.

Investment Growth

Unlike the fixed nature of state pensions, workplace pensions are usually invested in various financial markets. This investment strategy offers the potential for your savings to grow over time based on market performance. However, it’s essential to understand that while this can lead to increased returns, it also comes with associated risks. The value of your workplace pension can fluctuate, and there’s no guarantee of returns. In some cases, you might even receive less than what you originally invested, depending on market conditions

Tax Benefits

Contributions to your workplace pension come from your salary before tax, meaning you get tax relief on the amount you contribute. This makes it a tax-efficient way to save for retirement.

Choosing the Right Workplace Pension

There are a few different types of workplace pensions, so it’s important to choose the right one for you. Some factors to consider include the type of investment options available, the fees charged, and the level of employer contributions.

Making the Most of Your Workplace Pension

There are also a few things you can do to make the most of your workplace pension, these include:

  • Making sure you contribute the maximum amount your employer will match.
  • Consider increasing your contributions as you earn more money.

Understanding and actively participating in both state and workplace pension schemes can substantially improve your financial quality of life in retirement. If you’re unsure how to optimise these benefits for your specific circumstances, a financial adviser can offer valuable advice tailored to your needs.


Understanding your retirement needs is a multifaceted process, influenced by many variables, from lifestyle choices to financial obligations and market conditions. Pension Awareness Week 2023 is an opportune time to engage a financial adviser to carefully review all aspects of your retirement plan.


[1] Money Helper – Choosing the right care home

[2] Retirement Living Standards – Picture for your future – 2023

[3] Office for National Statistics – Saving for retirement in Great Britain – 2022

[4] Age UK – The New State Pension