Guide · Retirement & Pensions
How Much Do You Need to Retire? Working Out Your Number
The most important retirement question is not which fund to pick — it is knowing what target you are aiming for. Here is how to calculate your retirement number, factor in the state pension, and work out how far away you actually are.
Step 1: Estimate your retirement spending
Start with what you expect to spend in retirement — not your current income, but your anticipated costs. Most people spend less in retirement than during peak earning years (no mortgage, no commuting, no childcare), but this varies considerably. The PLSA (Pensions and Lifetime Savings Association) publishes annual Retirement Living Standards that provide useful benchmarks:
| Standard | Annual spending | What it covers |
|---|---|---|
| Minimum | £14,400 | Covers all needs, little more |
| Moderate | £31,300 | Some luxuries, a week's holiday abroad |
| Comfortable | £43,100 | Regular holidays, car, financial security |
Add roughly 50% to each figure for couples. Source: PLSA 2026.
Step 2: Account for the state pension
The full new State Pension is £11,502/year in 2026/27 (£221.20/week), uprated annually by the triple lock. You need 35 qualifying NI years for the full amount. For most people, this meaningfully reduces how much private savings need to generate — it is the equivalent of having around £287,550 in a pension pot (at a 4% withdrawal rate).
Your private savings only need to cover the gap between your total spending target and your state pension income. If you plan to spend £30,000/year and receive £11,502 from the state, your pot needs to generate £18,498/year.
Step 3: Apply the 4% rule
Multiply your required annual income (the gap figure) by 25 to get your savings target. This is equivalent to a 4% annual withdrawal rate — the rate the Trinity Study found could be sustained indefinitely across 30-year retirement periods.
| Spending target | State pension | Gap | Pot needed (25×) |
|---|---|---|---|
| £14,400 (Minimum) | £11,502 | £2,898 | £72,450 |
| £25,000 | £11,502 | £13,498 | £337,450 |
| £31,300 (Moderate) | £11,502 | £19,798 | £494,950 |
| £43,100 (Comfortable) | £11,502 | £31,598 | £789,950 |
Single person. Assumes full state pension. Use 3.5% withdrawal rate (×28.6) for a more conservative target, especially if retiring before 60.
How much to save monthly to get there
The monthly contribution you need depends heavily on how much time compound growth has to work. Assuming a 7% annual return (real return from a diversified global equity portfolio, after charges):
| Starting age | Years to 65 | Monthly contribution |
|---|---|---|
| 25 | 40 years | £167/month |
| 35 | 30 years | £368/month |
| 45 | 20 years | £891/month |
| 55 | 10 years | £2,878/month |
Assumes 7% annual growth, no existing savings. Includes employer pension contributions toward the total.
ISA vs SIPP: building tax-efficiently
A SIPP (self-invested personal pension) gives upfront tax relief — the government adds 20% for basic rate taxpayers, and higher earners can claim 40%. This makes SIPPs significantly more efficient for accumulation. However, you cannot access pension funds until age 57 (from April 2028). For early retirees, an ISA bridge is essential: draw from your ISA between retirement and 57, then switch to pension income once it becomes accessible.
Frequently asked questions
How much do I need to retire?
A common starting point is 25 times your expected annual spending in retirement — this is the 4% rule. If you expect to spend £25,000/year, you need £625,000. The UK state pension (currently £11,502/year at full rate) reduces how much your own pot needs to generate, so for many people the private savings target is 25 times the gap between total spending and state pension income.
What is the UK state pension in 2026?
The full new State Pension is £11,502 per year (£221.20/week) for 2026/27, uprated by the triple lock (highest of earnings growth, CPI inflation, or 2.5%). You need 35 qualifying National Insurance years for the full amount, and at least 10 years for any state pension at all. You can check your forecast at gov.uk/check-state-pension.
Should I use a pension (SIPP) or ISA for retirement?
Both, ideally. A SIPP gives you upfront tax relief — basic rate taxpayers get 20% relief, higher rate 40% — making it significantly more capital-efficient for accumulation. But SIPPs can only be accessed from age 57 (rising from 55 in April 2028). ISAs are accessible at any age and provide tax-free growth without the access restriction. The standard strategy is to max your SIPP first (for the tax relief), then use an ISA to bridge the gap to SIPP access age.
Is the 4% rule safe for UK retirees?
The 4% rule was derived from US market data (the Trinity Study, 1998) and assumes a 30-year retirement. For UK retirees with longer horizons or heavier bond allocations, 3.5% is considered more conservative. It is a planning guide, not a guarantee — sequence-of-returns risk (retiring into a market crash) is the biggest threat to the rule holding up.