How much do I need to retire comfortably in the UK?
One of the most common questions faced by Financial Advisers is: “How much do I actually need to retire comfortably?”
It’s a deceptively simple question, yet when we peel back the layers this can get a little more complex. In this blog, Castlefield adviser Michael Owens explores recent research to help you unpack what a comfortable retirement looks like, and highlights how a robust financial plan can help bridge the gap between where you are and where you want to be.
What does a ‘comfortable’ retirement look like?
Based on independent research by Loughborough University, the Pensions UK/Loughborough University Retirement Living Standards describe the quality-of-life people can expect in retirement based on different levels of income. These standards help individuals understand how much money they might need to live on once they stop working.
Broken down into three levels: Minimum, Moderate and Comfortable, the standards have been created as a meaningful way for savers to understand retirement income needs. This is further broken down with examples for each cost. For example the ‘Minimum’ living standard assumes an individual goes on a week long UK holiday, whereas the ‘Moderate’ standard assumes a fortnight 3* all-inclusive holiday in the Med and a long weekend off peak break in the UK [1]. Everyone’s circumstances are different so it’s possible to mix and match these costs to tailor to your own retirement income needs.
Source: Retirement Living Standards
How much do I need?
There’s recently been some good news for those who would like to secure a guaranteed level of income to take them through retirement. An annuity is a financial product designed to provide a regular income stream over a specified period or for the rest of a person's life. Annuity rates have recently witnessed a significant rise, reaching their highest level in a decade. For example, a healthy 65-year-old with a £100,000 pension pot could expect to receive around £7,720 per annum, based on an average rate of 7.72%, according to Standard Life [2]. This represents a 10% year-on-year improvement and a substantial recovery from the low rates seen in 2020.
Of course, annuities aren’t the only solution for providing income in retirement. Since pension freedoms changes were introduced in April 2015, individuals are no longer required to buy an annuity and can now flexibility draw an income from a pension in a way that suits their circumstances. Unlike with an annuity, flexibly drawing an income from a pension pot would usually see the majority of the funds remain invested to rise and fall with markets. When flexibly accessing pensions the long-term sustainability of a pension pot is guided by market returns. The best method of accessing pension funds can be a very personal decision and it’s important to note that individuals can blend these options to find the right balance for them.
Retirement isn’t just about stopping work – it’s about enjoying the life you’ve worked hard for.
One tool that helps with planning for retirement is a cashflow forecast. This is a key resource in every financial adviser’s toolkit. Cashflow forecasts model how an individual’s future is likely to unfold based on information and assumptions held on their circumstances. From this projection, we’re able to work backwards and assess if any changes are needed to improve the position further down the line. Modelling different cashflow forecasts can really help to visualise a person’s retirement with clarity. What’s more is we’re able to replicate events such as a market downturn or a rise in inflation to stress test how robust a retirement plan is.
What practical steps can I take now?
There’s plenty that can be done to improve an individual’s chances of a comfortable retirement, regardless of how near or far you are from retirement.
1. Obtain a state pension forecast
This can be done at www.gov.uk/check-state-pension. If you’re not on track to receive the ‘full’ amount, voluntary contributions can often be made up prior to reaching state pension age to boost the amount you receive.
2. Consider all assets
Retirement income doesn’t just derive from pensions. Think about how other resources can be used including ISAs, savings, investments, property, or inheritance prospects.
3. Track down old pensions
Locating old forgotten about pensions can be tricky. A good place to start is with making a list of old employers and digging out old paperwork to find pension provider names. From there the Pension Tracing Service can help you to recover your pensions: www.gov.uk/find-pension-contact-details
4. Review your pensions
Find out key details of your pensions, for example would your employer match any increases you make in pension contributions? Which underlying funds are your pensions invested in and have they kept pace with average market returns? What options does the pension have for accessing the benefits flexibly?
Retirement isn’t just about stopping work – it’s about enjoying the life you’ve worked hard for. That requires careful planning, setting goals and making adjustments along the way. If you would like more peace of mind and clarity over building a comfortable retirement consult a financial adviser to create a financial plan that’s bespoke to you.
Written by Michael Owens
References
[1] https://www.retirementlivingstandards.org.uk/
[2] https://www.standardlife.co.uk/about/press-releases/annuity-rates-surge
This article is intended for information purposes only and it does not constitute a personal recommendation or inducement to invest. It is based on information obtained from sources which we believe to be accurate but the accuracy of which we cannot warrant and may be subject to change at short notice, therefore we cannot be held responsible for the implications of relying on this information. The contents of this document are not intended to be construed as legal, accounting, tax or investment advice. With any investment your capital is at risk. You should seek independent financial advice if you are unsure whether an investment product is suitable for your personal financial circumstances and appetite for risk. Unless otherwise stated this information is accurate as at 31/08/2025.
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