Jenny Ross: Do you know how much is in your pension?
Colleague 1: I think I may have got an email – an end of year statement kind of thing – and just thought yeah I’ll log in and have a little look at that. So sometimes it’s prompted by things like that.
Colleague 2: The last time I checked my pension I think was when I started this current job, which was about five months ago.
Colleague 3: I don't think I've actually signed in yet.
Jenny Ross: As our quick poll of Which? staff shows, if your answer is no, then you're not alone. That's why we've created this podcast series – to help you feel more confident about your future finances. I'm Jenny Ross, editor of Which? Money. Welcome to this podcast from Which?. Episode 2: Are you saving enough for retirement?
Recent research from pension company Standard Life found that almost half of UK adults don't know how much is in their pension. Even if you do know exactly how much you've saved so far, the bigger challenge is gauging how much you'll eventually need. Cali Sullivan is the project lead for retirement living standards at Pensions UK.
Cali Sullivan: The retirement living standards is a set of guidelines that were created by Pensions UK and Loughborough University to give people an idea of the costs at retirement – what people spend at different levels and whether they're in a couple or a single. The reason we created the retirement living standards was because we found that a lot of people didn't really know how much they needed at retirement. So we wanted to make sure there was something available for people to have a look at.
Back in 2017, we took part in a consultation to find out what other people thought of that as well. So we created the six different categories within the retirement living standards to give people an idea of spending levels. Those spending levels that came out of it were minimum, moderate, and comfortable. Within each of those, we also have a one-person category and a two-person category.
The minimum one-person spending habits we found was about £13,400, and if you're in a two-person household, it was £21,600. For the moderate level, we have £31,700 and at the moderate for two people, we found they were spending around £43,900. Then the comfortable was £43,900 for one person and £60,600 for two people at comfortable.
Jenny Ross: You might be wondering what exactly is the difference between the three retirement living standards. According to Pensions UK, minimum covers all your needs with some left over for fun. The moderate standard gives you more financial security and flexibility, and the comfortable standard gives you more financial freedom and some luxuries. You can see the full breakdown of the expenses covered by each standard on the Pensions UK website.
It's also worth bearing in mind that Pensions UK's figures assume that you'll no longer be paying rent or a mortgage, as that's the case for most people in retirement. But if you're likely to still face housing costs, you'll need to factor these in on top.
The figures for each of the three living standards might sound a bit daunting. So let's break it down. How much do you need in your pot to reach these annual targets? Again, it's not an easy question to answer. It depends on how you decide to access your pension. We'll be looking at your options in more detail in a later episode. But let's say you choose to leave your pot invested and take income as you need it. This is known as pension drawdown.
To achieve the comfortable retirement living standard of £43,900 a year as someone living alone, we've calculated that you'd need around £600,000 saved. This assumes that you start taking your money at the age of 65 and live for another 20 years. We've also assumed that as well as money from your private pension, you're getting the full level of state pension, which is worth just over £12,500 as of April 2026.
If you have a partner, Pensions UK says you'll need £60,600 in total each year for a comfortable retirement. That means you'd need around £680,000 in your combined pots if you opt for drawdown. The important thing to remember is that there is no magic number that we should all be aiming for. You'll need to think about your own retirement goals and what it might cost to achieve them. Here's Cali Sullivan again.
Cali Sullivan: The retirement living standards are guidelines – they’re not set in stone. You might find that somebody spends more on a holiday than they do a car. You have to look at their guidelines, so you look at them and think, "Well, I don't spend that there, but I do spend a bit more here." It's a bit of a weighted counter, but these give people a bit of a practical view of what spending does look like at retirement and gives people an idea of what can they achieve and what do they need to look towards.
Jenny Ross: Let's look at how you'll build up your savings. If you have a workplace pension, minimum contributions are set at 8%. This is usually based on what's known as your qualifying earnings. That's earnings between £6,240 and £50,270. The 8% is made up of 5% from you, including tax relief, and then 3% from your employer. But there's no guarantee this will be enough for the retirement you want. So if you can afford to pay an extra, it's well worth doing so.
Even if you can't commit to increasing your regular contributions, think about making extra one-off contributions from time to time – for example, if you get a bonus. The good news is that even small increases can make a big difference over time. Mike Ambery is the retirement savings director at Standard Life.
Mike Ambery: In terms of example, a worked one would be we had a saver contributing the minimum at 8% from 22 might reach a pot of around £210,000 adjusted for inflation. Increasing to 10% could grow that £210,000 to £262,000. So a 2% increase is over £50,000 – £52,000. That's a difference in lifestyle at the point of retirement. Let's go another 2% and go to 12%. That could lead to £315,000. Just over £100,000 more would be that 4% increase, which would be a substantial difference.
Jenny Ross: To run your own numbers and work out how much your pot could be worth at retirement, you can use our calculator at which.co.uk/pensioncalculator Starting to save for retirement as early as possible in your career will give you the best chance of building up a healthy retirement pot. But there's no need to panic if you're coming to it relatively late. Here's Mike again.
Mike Ambery: The headline for me would be it's never too late to make a savings. Don't think, "Oh, because I haven't done it, I haven't got the energy to be able to do it." It's never too late. You can start, you get good tax advantage, good relief, and it's never too late to start saving into a retirement pot. One other thing that friends and colleagues have also worked out would be if someone contributed the minimum up till age 40 – say the 8% to age 40 – and then you just ramp it up because you can and that you're fortunate enough to be able to do it and then increased it to 10% at that point. That would go up to £240,000. So even in a sort of mid-phase of career, just bumping it a little bit adds tens of thousands of pounds because of compounding interest.
Jenny Ross: The question of whether people are saving enough for later life is at the heart of a government's new pension review. This is still in early stages but will be examining the pension system as a whole, including the state pension, before making recommendations for change. Some groups face an even greater challenge when it comes to saving for retirement. These include self-employed workers, who are less likely to have pension savings compared with employees.
And the gender gap persists. Analysis from the Department for Work and Pensions shows that women aged 55 to 59 have an average of £81,000 in private pension savings compared with £156,000 for men. That's a difference of 48%. It's clear that change is needed to help improve people's chances of a comfortable retirement. I spoke to some of my colleagues about this along with some people who have already retired.
Colleague 1: I would have probably benefited from some hand-holding whereas I've actually ended up trying to frantically save quite late on in my career, I guess.
Retiree 1: Every job that I had, I would investigate the pension provision to the nth degree. I didn't do it – I was frivolous, I made mistakes, I hold my hand up – but at this stage of my life now, I can't do anything about it.
Colleague 2: For me, the dawn of YouTube and podcasts have just made such a difference because it's been able to – it's given me access to experts from all around the world that I wouldn't have ever had access to before. Back in the day, we just gave money to the employer and sat back and did nothing.
Jenny Ross: As I mentioned earlier, you won't have to rely entirely on your own savings in retirement, as the state pension will also be a key source of income. But how exactly does it work? And how could it change in the future? We'll be looking at that in our next episode.
In the meantime, we have plenty more pensions advice and news on our website. Just go to which.co.uk/retirement We also have a monthly retirement planning newsletter full of tips and analysis to help you take charge of your savings. Sign up at which.co.uk/retirementnewsletter
