Planning for your retirement is so important. Life expectancy is currently around 81 years of age in the UK, and this number continues to increase. This means that should a person choose to retire at State Pension age, they will be retired for longer. With the State Pension age currently at 66, if a person lives to 81 years old, they will be retired for 15 years. So how much will you need beyond state provisions to ensure you’re financially secure for these retired years?

In this article we’ll discuss how to estimate the size of the pension pot you’ll require. We’ll explain the different pension income streams, pension allowances and how to boost your pension savings.

Retirement planning

It’s impossible to definitively answer the question “how much will I need in my pension pot”. Each individual circumstance is different, and there are many factors involved, such as how you are planning to spend your retirement. Plans to travel the world will require greater financial resources than time spent at home with family, for example. Your home ownership status is also a factor; if you own your home but will downsize in retirement, your property’s equity will lessen your reliance on your pension. Alternatively, if you’re planning to move to a retirement facility, there may be additional costs associated with this.

Whilst you have no way of knowing how many years of retirement you’ll have, you can ensure you’re in the best financial position possible. Determine your estimated monthly outgoings in retirement, based on your current expenses. Remember these may reduce in retirement, for example commuting costs will be nullified. A widely used rule of thumb is the “25x rule”. This is that you should aim for twenty-five times your annual retirement expenses saved across your pension pots. For example, if your expenses will be roughly £20,000, you will need approximately £500,000 across all your pension pots.

There are three streams of pension income for many: State Pension, workplace pension and private pensions. To determine how much should be invested in a private pension, you can deduct expected State Pension income (based on the current offering) and projected workplace pension income from the total requirement. Once calculated, determine if it is financially viable for you to achieve your investment goal. If not, your retirement plans may need to be adapted.

About the State pension

Once you reach State Pension age, you’ll become eligible to receive the State Pension. This is currently 66 for both men and women born before 1960 and increases depending on your birth year. You can check what age your state pension will kick in on the government website.

In order to qualify for the state pension, you need at least 10 qualifying years of National Insurance Contributions (NICs), however, to receive the full state pension, you need at least 35 qualifying NIC years. In the 2025-2026 financial year, those eligible for a Full State Pension will receive £230.25 per week. However, it’s important to note that the state pension is not guaranteed and should not be relied upon as your sole source of income in retirement. You can check your State Pension forecast on the Government website.

About workplace pensions

Since October 2012, eligible employees have been automatically enrolled into workplace pension schemes. To be eligible for auto-enrolment, you must be working in the UK, aged 22 or over, and earning over £10,000. Contributions to workplace pensions are based on your qualifying earnings (currently defined as income earned between £6,240 and £50,270). The minimum contribution level is 8% with employees contributing a minimum of 5% and employers a minimum of 3%. While you can choose to increase your personal contributions, many employers also contribute more than the required 3%. In some case, they may even match your contributions, offering a valuable boost to your retirement savings.

How much can you save each year?

Your pension annual allowance is the amount you are able to invest in a financial year, whilst benefiting from tax relief. This allowance encompasses all pensions you are contributing to. For most this is £60,000, or 100% of ‘relevant earnings’, whichever is lower. Relevant earnings include salary, self-employed income, bonuses, overtime, and commission, among other things. If you are unsure how much you can contribute to your pension, please get in touch with our team of advisers on 0116 222 0119. Your pension annual allowances reset each April, when the new financial year starts. You can find out more about pension annual allowances in our recent blog post.

How to boost your pension pots

There are a number of ways you can boost your pension pots before retirement. If you have worked for more than one employer since 2012, you may have multiple workplace pensions. If you are unsure of previous workplace pension schemes that you have been part of, you can use our pension finding service. Please provide information about previous employers and schemes so that we can send enquiries out for up-to-date information on your behalf. Once previous pensions have been located, we will determine if consolidating these pensions will be effective for you. If so, you could save money on management fees, and larger pension pots have the potential to unlock greater returns on investment*.

Regarding your workplace pension, you should contribute the most you are financially able to. Should you receive a pay rise at work, it can be a good idea to invest a percentage of the additional income you’ll receive each month into a pension. By doing this before you have become accustomed to the uplift in take-home salary, you’re investing more in your future without feeling the impact today.

Importantly, if you do not already have a private pension, look to begin investing in one as soon as possible. Any contributions made between now and when you retire will boost your financial security in retirement. The sooner you are able to start a pension, the more years you’ll contribute to it, and the longer the investments will have to grow*.

How Willday Wealth Management can help

How much you should be contributing to your pension pots depends on your retirement plans. It also depends on your current financial circumstances and how much you are able to contribute at this time. It is never too late to start investing for your retirement and contributing more now will ease financial pressures you may face in the future.

Contact Willday Wealth Management to discuss your retirement plans; we’ll work with you to manage your portfolio around your key financial objectives such as target retirement date. Our experts are on-hand to answer any questions you may have about setting up a private pension, and will help you get the most from your pension provisions.

Already have a private pension but wish to transfer it? We’ll handle the whole process for you. Contact our team to find out more.

* With investing, your capital is at risk and you may get less than what you invested. Tax treatment depends on your individual circumstances and may change in the future.