The honest answer
There's no single correct number — it depends on the lifestyle you want in retirement, when you want to retire, what other income you'll have, and how long you live. But there are well-established benchmarks that give you a useful starting point.
The PLSA Retirement Living Standards
The Pensions and Lifetime Savings Association (PLSA) publishes widely used benchmarks for annual retirement income:
- Minimum standard: £14,400/year — covers basic needs with some social activities. Assumes State Pension covers most of this.
- Moderate standard: £31,300/year — more financial security and flexibility. Allows a week's European holiday, some car costs.
- Comfortable standard: £43,100/year — more financial freedom. Regular holidays, new car every 5 years, home improvements.
These figures are for a single person. Couples need slightly less per head due to shared costs.
How much pension pot do I need?
A common rule of thumb is the "4% rule" — you can sustainably withdraw 4% of your pension pot per year without it running out over a 25–30 year retirement. To work backwards:
- Moderate retirement (£31,300): subtract State Pension (£11,502) = need ~£19,800/year from pension. Pot needed: ~£495,000
- Comfortable retirement (£43,100): subtract State Pension = need ~£31,600/year. Pot needed: ~£790,000
💡 These figures look large but remember: compound growth does the heavy lifting. Starting early and contributing consistently — even modest amounts — can build surprisingly large pots over a career.
The contribution benchmarks
As a general guide to what you should be saving as a percentage of your salary:
- Start at 25: Save 12–15% of salary (including employer contributions)
- Start at 35: Save 17–20% of salary
- Start at 45: Save 25–30% of salary
These are rough guides — your actual target depends on your existing pot, planned retirement age, State Pension entitlement, and desired lifestyle.
The "half your age" rule
A simple starting point: take the age you start saving, halve it, and that's the percentage of your pre-tax salary you should be saving each year. Start at 30? Save 15%. Start at 40? Save 20%. This includes employer contributions.
Am I on track?
A good benchmark for pension pot at different ages (targeting a moderate retirement at 67):
- Age 35: 1× annual salary
- Age 45: 3× annual salary
- Age 55: 6× annual salary
- Age 65: 10× annual salary
⚠️ These are rough benchmarks, not guarantees. Investment returns, charges, and contribution gaps all affect outcomes. A pension adviser can model your specific situation and tell you exactly where you stand.
What if I've started late?
Later starters need to save a higher proportion of salary, but it's never too late to start. Even at 50, a focused decade of high contributions can make a meaningful difference. The key actions are: maximise employer matching, carry forward unused annual allowance if possible, and consider a SIPP alongside your workplace pension for tax efficiency.