The short answer is that the amount you need for retirement will depend on your health, lifestyle, debts, savings etc. No two people will ever have the same conclusion.

However, there are some guidelines to help you work out how much you need to save for retirement.

In theory, most people will slow down in retirement and their income needs should be reduced. That’s not always the case and if you are looking to do lots of foreign travel, buy new cars or make large gifts to family members, logically, you will need a bigger pot.

One school of thought says you need two thirds of your income for retirement. This assumes that your mortgage has been paid off and there are no other considerable debts. Remember, there’s also the state pension, which can top up what you’ve saved personally. The full state pension is currently £8,546. It kicks in at 67 for men and 65 for women – but this is going to rise. It is also calculated on national insurance contributions and reduces if you have not paid 35 years of qualifying national insurance contributions. The government website is the best place to look for more information.

Which? surveyed 2,000 adults at the start of 2018 and found the average household spend was £26,000. Based on this spend (and provided they’re receiving the full state pension) the average household would need to have a retirement fund that pays £17,500 per year.

How much do I need to budget?

For a pension of £20,000 a year, someone who starts saving at 25 would need to save £246 a month. For the same amount, someone who starts saving at 35 would need to save £404. However, this is dependent on investment performance, as your pension fund typically goes into a large pot that makes investments and your slice of the pot will grow in line with the fund performance

Are you ready for retirement?

If you’re not sure how much is in your pension pot, or how these funds can be used, a Wren Sterling financial adviser can help.
Whether you’re trying to hunt down multiple workplace pensions, or considering transferring to another pension provider, we can help you find out all your options and decide which is the most suited to you.

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When should I start saving for retirement?

As soon as you possibly can. The more time you are investing for retirement, the more you will benefit from compound interest. Compound interest is where you earn money on your interest – for example if you earn 5% on £1,000 in one year, you will earn interest on £1,050 in the second year and so on.

Remember, you get tax relief from the government at your marginal rate. If you are a basic rate taxpayer, the government will give you 20% more, so £246 becomes £307. If you are a higher rate or payer, the tax relief is even more attractive at 40%.

How much are you contributing
to your pension?

How do I save for retirement?

The most tax-efficient way to save for retirement is via a pension. This could be your workplace pension or a personal pension. If you’re employed, speak to your employer about your workplace pension and if you’re self-employed, you can get support from your accountant or financial adviser.

If you choose to save money from your net salary (after tax, National Insurance and other deductions) you could look at ISAs because there is no tax charged on withdrawals, but advisers are likely to encourage you to make the most of your pension contribution allowances first because of the tax relief available.

How can I boost my retirement savings?

Some of the quickest ways to boost your retirement savings are to start earlier, pay more pension contributions through your gross salary and get professional advice on all of your savings and investments.

A financial adviser can help you optimise the rest of your finances to help achieve your financial goals and recommend the most appropriate pension fund for you in your circumstances.