Here’s a number that should worry you: the average UK pension pot at retirement is around £60,000. That might sound like a lot until you realise it provides about £3,000–£4,000 a year on top of the State Pension. Given that a “moderate” retirement costs roughly £31,300 a year for a single person, the gap for most people is enormous.
The State Pension
The full new State Pension for 2025/26 is £230.25 per week (£11,973/year). You need 35 qualifying years of National Insurance to get the full amount. Ten years is the minimum to get anything at all.
State Pension age is currently 66, rising to 67 between 2026 and 2028, and to 68 at some point in the late 2030s (the exact date keeps getting reviewed). Check your own forecast at gov.uk/check-state-pension — it takes two minutes and tells you exactly what you’ll get and how many qualifying years you have.
What Does Retirement Actually Cost?
The Pensions and Lifetime Savings Association (PLSA) publishes three living standards that put real numbers on it:
- Minimum (£14,400 single / £22,400 couple): Covers basics. UK holidays, a basic car, not much room for treats.
- Moderate (£31,300 single / £43,100 couple): Two weeks in Europe, a decent car, regular eating out, hobbies and gifts.
- Comfortable (£43,100 single / £59,000 couple): Long-haul holidays, a newer car every 5 years, home improvements, genuine financial freedom.
These assume you own your home outright. Still renting in retirement? Add £5,000–£10,000 a year. That’s a big difference.
How Much Should You Actually Be Saving?
A common rule of thumb: halve your age when you start saving seriously, and save that percentage of your salary. Start at 30? Save 15%. Start at 40? Save 20%. This includes employer contributions.
Let’s be more specific. To hit a moderate retirement income of £31,300, with the State Pension covering £11,973, your private pension needs to generate about £19,300 a year. Using the 4% drawdown rule, that requires a pot of roughly £483,000. A 30-year-old earning £35,000 would need to save about £450/month (including employer contributions) to get there by age 67, assuming 5% annual growth after fees. That’s a lot. But it’s the reality.
Auto-Enrolment: A Start, But Probably Not Enough
Since 2019, the minimum workplace pension contribution is 8% (5% from you, 3% from your employer) on qualifying earnings between £6,240 and £50,270. It’s better than nothing — much better — but for most people, 8% won’t get you to a moderate retirement.
If your employer offers contribution matching (they’ll match up to 6% if you put in 6%), always take the maximum match. Saying no to employer matching is literally refusing free money. It’s the worst financial decision you can make.
Tax Relief on Pension Contributions
Pension contributions get tax relief at your marginal rate. A basic-rate taxpayer contributing £100 only pays £80 out of pocket — the £20 tax relief goes in automatically. Higher-rate taxpayers can claim an extra 20% through their tax return, meaning £100 in the pension effectively costs just £60. That’s a 67% return before the money is even invested. Where else are you getting that?
The annual allowance is £60,000 (or your total earnings if lower). Unused allowance carries forward for up to 3 years.
Close Your Pension Gap
Use our free pension gap calculator to see how much you need to save each month to hit your target retirement income, based on your age, existing pots, and the lifestyle you want. Better to know now than find out at 65.