Table of Contents
How much do I need to retire? What is a good pension pot at 55? How big a pension will I need to be able to live comfortably when I retire? These are all significant questions that many people have and we will try to answer for you..
In this article, we’ll examine what a good pension pot is considered to be, how that compares to a typical full state pension and how you can boost your income in retirement
| What is a pension pot? | It is the total pension contributions you and/or your employer have saved into a scheme towards your retirement |
| What is the UK average retired household income? | £29,172 (Source: gov.uk) |
| Can I retire at age 55? | You can retire at any age, but you can’t access your pension until age 55 (rising to 57 in 2028) |
| What is a good pension pot at 55? | From £400,000 |
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What does ‘pension pot’ mean?
Before delving any further into the topic of “What is a good pension pot?” let’s first determine what is meant by the term.
It refers to the total amount of money that you and your employer (if you are not self-employed) contribute towards your retirement. It also includes any growth accrued from the investments within the pension fund or any tax relief from the government that’s been applied.
When considering what is a good pension amount, your pot does not include your State Pension, which is paid based on your National Insurance contributions over your working life. What is does include is your current workplace pension, any old work place pensions, plus any other private pensions you might have – so you may have several different pension pots.
Your pension providers should issue an annual statement updating you with each account’s current and projected values. Alternatively, some providers may allow you to check for yourself what the fund is worth on their websites or apps. It can be very difficult to keep track of lots of different pension pots, and that’s where our consolidation service can come in handy!
What is a good pension pot for a single person?
Understanding what a good retirement income is can be tricky, especially if your retirement is a long way off. The answer to the question, “How much is a good pension pot?” is relative, depending on the type of retirement lifestyle you’re aiming for and the age you want to retire (which determines how many years your pension will need to last you). But one thing is for sure. In March 2024, the Times newspaper reported that according to the ONS, the average pension pot in the UK was £37,000. When you look at the data shown below, you can’t escape the fact this amount falls short of what would be needed to support even a minimum lifestyle in retirement.
The Pensions and Lifetime Savings Association (PLSA) released the Retirement Living Standards, which divides retirement lifestyles prospects into three categories: Minimum, Moderate, and Comfortable. The table below shows what is considered an adequate pension in each category for both singles and couples (Full State Pension included).
| Minimum | Moderate | Comfortable | |
| Singles | £14,400 per annum | £31,300 per annum | £43,100 per annum |
| Couples | £22,400 per annum | £43,100 per annum | £59,000 per annum |
The figures are different for singles and couples in the London Area.
| Minimum | Moderate | Comfortable | |
| Singles | £15,700 per annum | £32,800 per annum | £45,000 per annum |
| Couples | £24,500 per annum | £44,900 per annum | £61,200 per annum |
But what do these arbitrary figures include when considering “What is a good pension amount?”
- Minimum – Food and drink (£55 per week, including eating out), council tax, mortgage or rent payments, clothes and shoes (up to £630), health products, household items, insurance, transport (but no car), and utility bills.
- Moderate – All of the above (up to £1,000 on clothing and shoes, and £105 per week on food), upgrading a car every ten years, and a two-week European holiday every year.
- Comfortable – Everything listed under essential and comfortable, plus £230 on food and eating out, a three-week holiday in Europe every year and upgrading your car every five years.
A recent retirement report by Scottish Widows revealed the percentage of people who won’t meet what the PLSA deems a minimum retirement has got even worse, from 35% in 2023 to 38% today.
The factors that influence pension growth
When you’re asking yourself, how much do I need in my pension pot, don’t forget to consider all factors that can affect the growth of your savings, whether we are talking about the UK average pension pot, or one above average. They include:
- The age at which you start contributing.
- The amount contributed by you (and your employers).
- Whether you are employed or self-employed.
- The age at which you begin to take pension income (otherwise known as pension drawdown).
- The size and frequency of any withdrawals.
- Global economics and stock market performance.
- The performance of your pension fund(s).
- The pension fees you pay.
- Transferring under-performing pensions to a new provider.
- With regard to your UK state pension, the amount you receive is dependent on your NI contributions, and government policy (for example, the continuance of the pension triple lock).
The age at which you can withdraw money from your pension
Before you can access any of the money in your pension, you must reach a certain age. This age is set by your pension providers and is usually 55 (rising to 57 in 2028). If you are forced to retire early through poor health or some sort of disability, the minimum age might change, but it is dependent on which pension provider you are with.
What is a good pension pot to retire at 55?
If your dream is to retire early, an age that some people commonly aim for is 55. But how much do you need in your pension pot at age 55 to make this dream a reality?
The answer to the question, “What is a good pension?” depends on the lifestyle you hope to have when you retire. Based on the figures shown above, as compiled by PLSA, it suggests an income of around £31,300 per annum would give you acomfortable retirement, covering all of your creature comforts plus the odd luxury now and again.
The average life expectancy today is about 86 years of age, so if you’re hoping to give up work at 55, it means that your pot is going to have to be big enough to fund your income for 31 years. So, the answer to the question of “How much is a good pension pot in the UK for 55-year-old couples?” is approximately £694,400 for a minimum lifestyle and £1,829,000 for a comfortable lifestyle.
When you compare these figures to the average pension pot in the UK at the moment, it’s a pretty sobering realistation that they don’t match.
If you would like help with working out your pension pot, you can use the Moneyfarm pension calculator.
The UK average retired household income
The average pension pot UK figure for those actively making contributions to private pensions has fallen in recent years. It is partly due to the fact that auto-enrolment has enabled a surge of new savers whose pots are relatively small. It has also meant that more young and lower-paid individuals have joined pension schemes. But given that the average pension pot in the UK is only £37,000 right now, even if you tack on the state pension, it still produces a gloomy outlook for people’s financial future.
So far, we’ve discussed the various incomes needed to support certain categories of retirement lifestyles in theory, but what is the reality?
According to figures published on the Gov.uk website, the average income for pensioner couples as of the end of the 2023 financial year, was £561 per week (£29,172 per annum), while for single pensioners it was £267 per week, or £13,884 per annum.
Comparison of pot sizes by age
We have already answered the question of “What is the average pension pot in the UK,” and to recap, the answer was £37k.
| Age Group | Male | Female | Average Pot at 66 |
| Under 30 | £3,907 | £3,214 | £195,058 |
| 30 to 39 | £11,326 | £8,927 | £166,907 |
| 40 to 49 | £26,241 | £19,592 | £123,813 |
| Over 50 | £50,575 | £27,861 | £87,887 |
The table above (based on information from ONS) not only indicates the importance of starting pension contributions at an early age, but it also shows that there is still a significant gender gap.
Not only does the UK average pension pot not match the suggested value for even a moderate retirement income, it’s even worse when you consider that the taxman will demand his share. After the 25% you can withdraw from your pension tax-free from age 55 (rising to 57 in 2028); any other withdrawals will be included inyour overall income. The amount of income tax you will pay will be subject to your overall income, including your pension, and your income tax band.
Will your pension run out?
The state pension is guaranteed for life. So, too, are Defined Benefit pensions, like final salary pensions. It is the responsibility of the government or your employer to ensure there are sufficient monies to cover paying your pension until you die. Defind Benefit schemes tend to be for workers in the public sector – civil servants, NHS workers, the police, and teachers. However Defined Benefit schemes are much less common now, and you’re more likely to have a Defined Contribution pension which will only last as long as the savings you have and the amount you withdraw during retirement.
If your pension is a defined contributions scheme, you can leave your retirement savings untouched and allow them to hopefully grow further, purchase a guaranteed income with an annuity, or opt for income drawdown. The choice is yours. Don’t forget that if you need help with working out your pension pot size or if your pension is on track, you can use the Moneyfarm pension calculator.
Withdrawal Strategies
Suppose you choose to go down the drawdown route. In that case, there is always the possibility that your pot will run out, so the answer to the question of “How much money do you need to retire?” is to err on the safe side and contribute as much as you can during your working life so you could have a bigger pot—the bigger, the better. The smaller it is, the more careful you’ll have to be with how much you can take out or drawdown.
Most of this article has concentrated on retiring at 55, but what is a good pension pot at 60 years of age? Let’s take a look.
Retiring at 55 may be beyond your financial means if you want to enjoy a comfortable retirement. But let’s say you’re asking yourself, “Can I retire at 60 with 500k in my UK pension pot?” – the answer is yes, it could be feasible as it means you have another 5 years during which you and you and your employer can continue making contributions, as well as receiving tax benefits. However, if you do end up with a 500k pension pot at 60, when the time comes to start drawing down your pension, you would still need to be pretty careful with your spending.
One common rule of thumb is to aim for a retirement income that’s about 70% of your pre-retirement salary. This takes into account some expenses, like commuting, work-related costs or mortgage and living costs, typically decrease after retirement.
For instance, if you earn £50,000 per year before retirement, you should aim for an annual retirement income of around £35,000. This rule may not work for you if you are renting or still have to pay a mortgage.
Another way of approaching it is the 4% rule. Withdrawing 4% of your pension pot annually is commonly seen as the safe withdrawal rate. So, if you want an annual retirement income of £35,000, you would need a pension pot of:
- £35,000 – £11,502 (full state pension) = £23,498
- £23,498/0.04 = £587,450
How to supplement your pension income
The average personal pension for those aged between 65 and 74 is currently £190,000, according to the ONS.. If you don’t think this will cover your basic needs in retirement, you can always find ways of supplementing your income. There are a few things you can do to boost your retirement income:
- Check if you are entitled to any benefits.
- Track down your lost pensions.
- Take in a lodger.
- Return to or continue part time employment.
- Deferring your state pension.
- Other investments, like ISAs or property.
Tracing your lost pensions can be hard work, but the good news is we can help with our , where we will do the hard work for you.
Understanding inflation’s impact on your pension
When asking yourself, “What is a good pension amount?” it’s crucial to consider the potential impact of inflation. Inflation represents the rate at which the general level of prices for goods and services is rising, and, subsequently, the rate at which the purchasing power of your money is falling. Over time, this can significantly erode the value of your pension pot and purchasing power.
For example, at the target inflation rate of 2% per year, the purchasing power of a given pot would effectively halve in just over 35 years. This means the amount that seems adequate today may be insufficient for maintaining your desired standard of living in the future.
Understanding inflation and incorporating it into your retirement planning is an essential part of ensuring you have a good pension amount. You can read about the impact of inflation on your savings on the UK Government’s website.
The best way to manage your pensions
Once you have answered the question of, “How much do I need in my pension pot?” your next question could be, “What’s the best way of managing my savings?” One answer would be to track down any lost or forgotten pensions, appoint a financial adviser, and instigate a pension transfer. While tracing your lost pensions can be hard work, we can do all the hard work and help with our new .If you’re investment-savvy, you could manage the pension investments yourself. However, you can’t afford to make mistakes when it comes to your retirement savings. You would be best to get expert advice, and our investment consultants are always on hand to make sure your pension is invested in the right way for you.
Getting professional advice
Most private pensions will allow you to access the funds when you reach 55 (rising to 57 in 2028). You can usually withdraw 25% tax-free. Obviously, the more to take out, the less will be left, and the potential for future growth is reduced. You could decide to take out an annuity, but many people are put off by how little they are guaranteed in terms of regular retirement income.
This is when getting the right professional advice can be invaluable. A wealth management specialist will be able to advise what is a good pension pot, and whether or not your fund lives up to your expectations. If they don’t, they will be able to advise you on the best steps to take. Our investment consultants are always on hand to help you. Your options could include:
- Increasing the size of your pension contributions.
- Re-evaluating your planned age of retirement.
- Reducing your future outgoings.
- Making sure your pension is invested in the best place for you.
- Keeping a close eye on the fees you’re paying.
You should carefully think about taking money from your pension, and use it as a last resort, especially if you just plan to put it in your bank account. It’s best to look at other places you can get the money from before touching your pension before you actually plan to retire.
Now is the time to act
Asking yourself, “How much pension pot do I need to retire,” is not an easy question to answer, particularly if you’re still some years away from retiring, so the best time to review your pot situation is now.
Even in your 50s, you still have time to modify your plans and make the right investment decisions. If the answer to “What is a good pension pot at 55?” doesn’t cut the mustard, you still have a few years left to change things.
Don’t take any chances. Now, know that the answer to the question, “What is a good monthly pension amount for UK pensioners,” and that it is way above the size of the UK average pension pot people are currently anticipating, the sooner you increase your contributions and optimise your pension, the better. Time is of the essence. The closer you get to retirement age, the less time and chance you’ll have to turn things around.
FAQ
What is a good UK pension income?
A good UK pension pot for a comfortable retirement starts from £14,400 per annum. However, a pot of £31,300 to £43,100 per annum is required if you want a more lavish retirement lifestyle.
Can I retire at 60 with 500k in the UK?
Yes, you can retire at 60 with 500K in the UK. However, it depends on the kind of monthly income you want in retirement because your lifestyle and individual circ*mstances will impact your quality of life. If you are a frugal spender, a 500K pension pot will go a long way, and you can have a comfortable retirement.
How much do I need in my pension to retire at 55 in the UK?
You can access your pension at age 55 (rising to 57 in 2028), but you need to save up more because you are retiring early. If you wish to retire at the age of 55, you need to start saving early, and you will need at least a £400,000 to £650,000 pension pot.
How can I check my pension pot?
You can check how much is in your pot and what the estimated final pot size will be by contacting your pension provider.
How to find lost or forgotten pensions
If you have lost or forgotten about workplace pensions you may have accumulated during your working life, you can use the “find pension contact details” service provided on the UK government website. Or we can help , where we will track down your lost pensions for you and transfer them into a new, personalised pension that is invested in the right way for you.
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