A pension is a long-term investment. Its value can go down as well as up and could be worth less than was paid in. Laws and tax rules may change in the future. Your own circumstances and where you live in the UK will also have an impact on tax treatment.

Will I have enough for the future?

It’s important to think about whether you’ll have enough money to cover the cost of the lifestyle you want in retirement. You may be eligible for the State Pension, but you might not manage on this alone. Plus, you may want to retire from work before you reach State Pension age.

This is where workplace and personal pensions can come in. Saving into a pension plan could help to cover your costs and achieve the lifestyle you're aiming for.

How much money will I need to retire?

The amount of money you'll need in retirement depends on the type of lifestyle you’re picturing for yourself. We know that everyone’s different. For example, some people will want to travel abroad and go out regularly once they’ve said goodbye to the workplace. Others may want to spend a bit more time at home with loved ones.

That’s why we’ve created the retirement tool below. Simply pick the things you want to do in retirement from our list. We’ll then help you understand how much money you may need to make these things happen. Figures are correct as of April 2024.

Retirement tool - your life once you stop work

What kind of life would you like to lead when you've said goodbye to the 9-to-5? Create a vision of your desired retirement and we'll give you an idea of how much money you'll need to fund it, guided by research from the Pension and Lifetime Savings Association's PLSA Retirement Living Standards.

To fund the lifestyle you've just chosen, you'll need:

£14,857.50per year before tax
This example is not designed to be specific to your personal circumstances. Its purpose is to act as a guide to help you understand the income you might need to fund the lifestyle you want, using the Retirement Living Standards from the PLSA. Figures are based on today's costs for such a lifestyle and do not take future inflation into account. We have used the PLSA's 'minimum' standard of living as a starting point and allow you to add items of your choosing which come from the 'moderate' and 'comfortable' standards of living. Find out more about the living standards on the PLSA website

How can a pension plan help me save?

Putting your money into a pension plan is one of the most tax-efficient ways to save for the retirement you want.

Employers can pay in

If you have a workplace pension, your employer will normally pay in a minimum of 3% of your qualifying earnings, and you’ll pay in a minimum of 5%. So that’s at least 8% being saved for your retirement. Some employers may even match your payments up to a certain level - so the more you pay in, the more they may add. This could help to give your savings a boost.

Money is invested

The money in your pension plan is invested, which means it has the potential to grow in value. How long you’re invested for can influence how much money you could get back when you retire. Generally, the longer you can keep your money invested, the more potential it has to grow.

The type of investments you have can also make a big difference to how much you have in the future, so it’s important to understand your options.

There are ready-made investment options designed to help you meet your goal, which you won’t have to actively manage yourself. But if you feel confident with investing and want to be more involved, you might prefer to choose your own investments from a range of fund options.

Remember, it's important to review your investments regularly.

Keep in mind the value of investments can go down as well as up and you may get back less than was paid in.

Tax benefits

One of the great things about saving into some pension types is the tax benefits you can get.

You can often get tax relief on your pension payments. The amount you get depends on the rate of income tax you pay. So, for example, let’s say you’re a basic-rate taxpayer and pay 20% in income tax, meaning you’d get 20% in tax relief. If you pay £80 into a pension plan, £20 of tax relief will be added to that, so £100 total will be paid in. And if you’re a higher or additional-rate taxpayer who pays 40% or even 45% in income tax, it could cost you even less to save more into a pension plan. However, you do need to claim anything over 20% back from the government.

Different parts of the UK can have different rates of income tax. Tax rates are currently the same in England, Wales and Northern Ireland, but they’re different in Scotland.

And remember, how you get tax benefits will depend on what type of pension plan you have. If you’re part of a salary sacrifice or salary exchange scheme, your tax benefits may work differently to what’s shown above. You’ll only be entitled to get tax benefits up to your pension annual allowance – you can read our guide to find out what this means for you.

Can I change how much I'm paying in?

If you have a pension plan, it's worth keeping an eye on how much you're paying in and making sure that's still right for your circumstances.

You'll usually have the option to change your monthly payments into your plan or make a one-off payment. If you want to know more about how to do this, you can check with your employer or pension provider.

Keep in mind your money is invested, so the value can go down as well as up.

What if I have savings in different pension pots?

If you’re saving for retirement and you’ve found yourself with more than one pension pot, you could bring them together with a pension transfer - which you can do with us or another provider. This can make it easier to see if you’re on track for the retirement you want. Plus, it can help you cut down on paperwork.

Transferring other pension plans will not be right for everyone. You could lose money by giving up valuable guarantees or benefits you might get from your other pension plans. For more information on important things to consider, check out our pension transfers guide.

 

  • Find an adviser

    We recommend you seek appropriate guidance or advice before you make any decisions. You can get help finding an adviser on the MoneyHelper website

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    We’ll be happy to help – either call us or log in to send us a secure message through your account mailbox.

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