When planning for retirement, it’s crucial to base your strategy on realistic and forward-looking figures. Below we explore the savings required to achieve a comfortable retirement income, based on UK averages and future projections.
Establishing Your Income Target
We’ve used the UK average salary of £37,430 (ONS, April 2024), which translates to a net income of approximately £2,510 per month.
In retirement, spending needs typically fall. We’ve assumed a retirement income target of two-thirds of this net income, equivalent to £1,742 per month net, or approximately £23,000 gross per year.
This forms the benchmark for the rest of our analysis.
Annuity Income at State Pension Age (67)
A 67-year-old retiring in July 2025 would need the following pension fund amounts to secure £10,128/year inflation-linked annuity income (indexed to RPI). These figures are based on current annuity rates from leading UK annuity providers and industry analysis:
| Annuity Type | Annual Income | Indexation | Guarantee | Spouse Cover | Capital Required Today |
| Single Life | £10,128 | RPI | 5 Years | None | £220,410 |
| Joint Life (100%) | £10,128 | RPI | 5 Years | 100% | £190,627 |
*Annuity rates based on non-smoker, no health conditions applied
A single person today would therefore need a pension fund of £190,627 in addition to the State Pension to provide a total monthly income of approximately £1,742.
For couples, assuming each partner has a similar provision, household income would be doubled. However, the loss of one State Pension on first death reduces this total. A 100% joint-life annuity ensures the annuity income continues fully to the surviving spouse.
Projecting the Future Value of Pension Needs
While the figures above apply today, someone in their 30s, 40s, or 50s retiring in the future will need significantly more due to inflation. Assuming 2% annual inflation, the capital required to purchase the same annuity income in future years is:
| Years Until Retirement | Required Today (£190,627) | Future Value @ 2% Inflation |
| 30 Years (Age 30s) | £190,627 | £345,294 |
| 20 Years (Age 40s) | £190,627 | £283,262 |
| 10 Years (Age 50s) | £190,627 | £232,373 |
Monthly Savings Required to Reach Target
Assuming each age group has the average pension pot (ONS and PensionBee), here are the monthly contributions required (net of 1% annual fees, using accurate monthly compounding):
| Age Group | Current Pot | Years | Target (Inflation Adjusted) | 3% Net Return | 5% Net Return | 7% Net Return |
| 30s | £39,500 | 30 | £345,294 | £430.99 | £214.11 | £38.15 |
| 40s | £80,000 | 20 | £283,262 | £424.57 | £174.96 | £15.13 |
| 50s | £137,800 | 10 | £232,373 | £347.46 | £123.97 | £0.00* |
* Existing pot sufficient to reach goal at that return rate.
It’s also worth remembering that saving for retirement is often a joint effort between employees and employers. Many companies offer generous matching schemes, where increased employee contributions are met with additional employer payments. This can make reaching your retirement savings goal significantly easier.
Additionally, while higher rates of return may show that your current fund could be sufficient, there is always a risk that investment returns may fall short of expectations. A good principle is to plan for the worst and hope for the best—if the higher returns do materialise, your retirement will be even more comfortable. If they don’t, you’ll still be on track.
Retiring Before State Pension Age (e.g., Age 60)
To retire 7 years early, you’d need additional capital to bridge the income gap before the State Pension begins. Based on a gross income of £23,000/year:
- Required today: £161,000
Inflation will erode purchasing power over time. The equivalent value of that £161,000 in future money is:
| Years Until Retirement | Future Value @ 2% Inflation |
| 30 Years | £283,262 |
| 20 Years | £191,627 |
| 10 Years | £190,627 |
This is in addition to the amounts shown earlier for annuity purchase at age 67.
Key Takeaways
- A retiree targeting a £23,000 gross income needs approx £190,627 today, plus more if retiring early.
- Inflation significantly increases future capital needs
- Most people will need to save more than they realise, especially if starting late.
- Employer contributions can greatly boost pension savings
- Spouse’s income and State Pension must be considered in planning.
- Plan for the downside—a cautious approach ensures better protection in retirement.
- Advice is essential. Retirement planning should be based on personal circumstances and long-term objectives.
FCA-Compliant Disclaimer
This article is for information purposes only and does not constitute financial advice. Retirement needs will vary depending on your goals, assets, health, and personal circumstances. Annuity rates and State Pension rules can change over time. You should speak with a regulated financial adviser to understand your retirement options.
Need help planning your retirement? We’re here to guide you through pension options, savings plans, and retirement strategies tailored to your goals please contact us.
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