How much do I need in a pension?

This topic contains 1 reply, has 2 voices, and was last updated by Holly Mackay Holly Mackay 5 months, 2 weeks ago.

Pensions  |  Retirement  |  Investments
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Tyrone
Worried

How much do I need in a pension?

This is not full-fat regulated capital 'A' advice - that costs.And you need to see a financial adviser for that. But hopefully this is some useful food for thought.
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Holly Mackay

The answer, of course, is ‘it depends’. If you’re after the bog-standard type of retirement – a bit of golf, a bit of gardening – your income needs will be lower than if you have a more deluxe later life of champagne and cruises planned. Any calculation as to how much you will need in your pension should start with a calculation of how much income you are likely to need in retirement. You can then work backwards.

The basic rule of thumb is that your income will be your final pension pot divided by twenty. Scary, huh? If you want a more accurate guideline as to how much you’ll need in retirement, the Money Advice Service has a handy calculator here.

It is worth remembering that not all your retirement income has to come from your pension. You may have ISAs income from property or from inheritance. These all go into the pot. The Money Advice Service calculator will help you take this into account. You also need to make sure you factor in the State pension, currently a relatively generous £155 a week for those who have made all the relevant contributions.

It is worth doing this exercise in your forties or fifties when you can still do something about it if it looks like you are going to run short. That means looking at how much your work pension, any personal pensions and savings might be. No-one wants to have to re-start their career in their seventies because the gold-standard retirement they planned hasn’t quite worked out that way.

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The (relatively!) youthful Adam is a self-described Finance Nerd. He’s a Chartered Financial Planner and a fellow of the Personal Finance Society (blah blah blah). More interestingly, he works primarily with up and coming…full bio

Expertise: Pensions, Saving for a property
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