How Much Pension Do I Need?

Target pot calculation works backwards from desired retirement income. The 4% rule (derived from the Trinity Study) suggests withdrawing 4% of your pot in year one, then adjusting for inflation annually, gives a high probability of lasting 30 years. To generate £20,000/year from drawdown, you need £20,000 / 0.04 = £500,000. Alternatively, current annuity rates convert pot to income directly: at a 6.5% annuity rate, £20,000/year requires £307,692.

The State Pension offsets your required private provision. The full new State Pension of £241.30/week (£11,502/year in 2026/27) reduces the income your private pension must generate. If you want £25,000/year total and expect full State Pension, your private pension only needs to produce £13,498/year, requiring a pot of approximately £337,450 at 4% drawdown or £207,662 at a 6.5% annuity rate.

Working backwards to today, the calculator uses compound growth projections. Given a target pot, current savings, years to retirement, and assumed growth rate (typically 5% nominal for a balanced portfolio), it calculates the required monthly contribution using the future value of an annuity formula. Charges reduce effective growth, so a 5% gross return with 0.5% charges yields 4.5% net growth.

How big a pension pot do I need? Pensions and Lifetime Savings Association (PLSA) UK Retirement Living Standards (2026): Minimum £14,400/year (couple £22,400) — essentials only. Moderate £31,300 (couple £43,100) — annual holiday, hobbies. Comfortable £43,100 (couple £59,000) — multiple holidays, replacing car every 5 years. For 'moderate' from age 67, you need pot ~£280-£450k + full State Pension £12,547.60. For 'comfortable': £600k+. Most UK retirees have under £100k — significant shortfall.

Savings rate rules of thumb. Half your starting age = % of salary to save. Start at 25 → 12.5%; at 35 → 17.5%; at 45 → 22.5%. With employer match 3-5%, personally contribute 7.5-19.5% extra. State Pension alone replaces ~25-30% of average UK earnings — insufficient for most. To replace 70% of pre-retirement income (typical 'comfortable' target), need workplace + personal pension of ~40-45% replacement — requires 15-20% of salary saved over 40 years.

Power of compound growth from early start. £100/month from age 25 at 7% real return = £262k at 65. Same £100/month from 35 = £121k (less than half!). From 45 = £52k. Each decade of delay roughly halves the final pot. Conversely, doubling contributions late in career has much less effect than starting early. Investment growth dominates contributions — at 30 years, growth = 70%+ of final pot.

What the pot needs to do. Sustainable withdrawal rate: 3.5-4% per year (Bengen rule adjusted for 2026 conditions). £400k pot × 4% = £16k/year for 30 years. Combined with full State Pension £12,547/year = £28,547 total — close to 'moderate' standard for single retiree. For couples or longer retirement (start age 60, life to 95 = 35 years), reduce withdrawal to 3% — needs £600k+ pot. State Pension is the foundation; private pension is the difference between 'minimum' and 'comfortable'.