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How Much Money Do I Need to Retire in the UK?

Written by, Marija Petkova

Updated April, 18, 2022

If you’re planning on retiring as early as possible, you’re probably wondering “how much money do I need to retire in the UK?” 

Let’s dive in.

How Much Do You Need To Retire?

It’s difficult to predict how much you’ll need to enjoy a comfortable retirement because it depends on a variety of factors, including your lifestyle, personal circumstances, debt, and costs in retirement.

The amount of money needed to retire can also vary because of the economy.

According to the latest report from the Pension and Lifetime Saving Association, the minimum standard’s annual budget has increased by £700 to £10,900 for a single person and £1,000 to £16,700 for a couple in 2021.

The moderate standard’s monthly budget has risen as well, reaching £20,800 for a single person and £1,500 for a couple in 2021.

The trade association considers these numbers to be relatively good retirement income for a couple. It says that most couples in the UK can easily meet the minimum requirements if they get a full state pension. Some singles might need an extra boost from a private pension scheme. 

Based on the numbers, almost one in six single employees is expected to have between a moderate or comfortable retirement income.

The comfortable retirement income in the UK, on the other hand, rose to £33,600 for one person and £2,200 to £49,700 for a couple.

Average Annual Spending for Retired People

The average UK retiree spends around £15,000 a year.

It is estimated that they spend around £10,400 on essentials like groceries, clothes, bills, and housing, and £5,200 on leisure activities like going out and travelling.

Naturally, the amount they spend primarily depends on their lifestyle and their location. 

For example, those who live in a city will typically spend more than those who live in a rural area. And those who enjoy regular beauty treatments or theatre trips will spend more than those who don’t.

How Much To Save For Retirement in the UK?

When it comes to retirement planning, it’s important to start saving as early as possible. You’ll need 20-25 times your retirement costs to ensure a comfortable retirement.

For example, if you spend £30,000 on average, you’ll need £600,000 – £750,000 in your pension pot.

As a rule of thumb, you should start saving a minimum of 10% of your annual income if you start putting money into your money pot at the age of 20. If you start in your 30s, you’ll need to put aside 15% of your annual income for a comfortable retirement.

Before entering a pension scheme, it’s important to consider all the rules, including what will happen to your pension when you die.

Other Sources of Retirement Income

You should understand your options well before you retire. There is no one-size-fits-all plan, so you should talk to an accountant or financial advisor to figure out what is best for you.

Here are the most popular options:

Annuities

An annuity is a life insurance policy that provides a steady annual income for a certain period, usually for the rest of your life. The price differs based on your health and how much money you want to receive.  Based on current rates, you can get an annual income of between £4,000 and £5,000 with a £100,000. 

Drawdown

A pension drawdown allows you to access and withdraw money from your pension pot while keeping the rest of your fund to increase through investment. It’s a low-risk investment strategy that gives you the chance to grow your pension, though there will always be a risk of your funds dropping since they’re invested.

Savings

Long-term savings and investments may help you supplement your retirement income if you’re consistent in your savings. The only downside is that interest rates are low and might fluctuate over time. 

Bottom Line 

The amount of money you need to have to return depends on your lifestyle and spending habits. On average, a UK citizen needs between £200,000 and £350,000 to meet minimum requirements.

However, with the right retirement plan, savings tactics, and investment strategies, you might be able to grow your pension pot and make sure you live comfortably in your golden years.

                           

Frequently Asked Questions And Their Answers

How much money do you need to retire in the UK?

According to PLSA, an amount of £20,200 or £33,000 a year is sufficient to live a moderate or comfortable life throughout retirement, respectively.

What is a good pension pot at 60?

The average pension pot at 60 is around £60,000. Whether that’s good enough for you, depends on your lifestyle.

Can you retire with 500K in the UK?

£500,000 can be enough for a comfortable retirement at the age of 55. If you’re wondering “how much money do I need to retire in the UK?”, you should consider your lifestyle and your retirement costs.