Tailor Made Pensions - How Much Do I Need To Retire

How Much Do I Need To Retire ?

If you are approaching retirement then a key question is  ‘How much do I need to retire and for how long will it last?’. The latter part of the question very closely linked to “What is the maximum I can take from my pension?”.

This article focuses in the first part of the question and we will follow this up with another discussion that covers the second part. The answer is something that requires the taking of a combination of factors into account. Really the question should be broken down into a few questions with a different heading-

What do I need to do to be able to afford to retire on the income I want at the date I want to?

It is all very well asking the question- ‘How much do I need to retire ?’ but picking out a number from thin air is not  going to solve the problem on its own.

What needs consideration, ideally in conjunction with a financial planner, is the following-

  1. What expected level of income is realistically expected at retirement? ( in real terms )
  2. What is the expected/preferred date of retirement?
  3. How much State Pension are you entitled to, and when?
  4. What current pensions and investments do you have?
  5. Will all debts be cleared by retirement? Or, is there a plan to clear them?
  6. Do you have surplus income (savings) at the end of each month?

The next thing to consider is whether point 1. above is achievable with your current plans. If not, what changes need to be made, especially if there is no spare income to save at the end of each month?

Capital or Income?

‘How much do I need to retire ?’ does not address the difference between capital and income. Let’s consider the UK State Pension- currently payable at 67 for most of us.

The full-rate State Pension is currently £168.60 per week or £8,767.20. What is the capital value of that? Well, it depends,  we can consider comparisons with an index linked annuity for a 67 year old that increases with inflation. Currently the rate of annuity for this would be circa 3.1% pa. Using this to capitalise the value of the State Pension gives a capital value of £282,800.

I am sure many will be surprised to read this!

Given that many complain that the UK State Pension is inadequate and falls well short of other pensions payable in the EU, it shows just how much capital needs to be put aside just to match the State Pension.


In part two, we will look at the amount of savings that need to be put aside to answer the ‘How much do I need to retire ?’ question in more detail. Indeed, you end up really asking, “For the lifestyle I want, when can I afford to retire?”

We will be answering these other questions in follow on articles to assist you through the planning for retirement.

‘How much do I need to retire ?’ was the heading of a recent feature in The Telegraph

The views expressed in this article are not to be construed as personal advice. You should contact a qualified and ideally regulated adviser in order to obtain up to date personal advice with regard to your own personal circumstances. If you do not then you are acting under your own authority and deemed “execution only”. The author does not accept any liability for people acting without personalised advice, who base a decision on views expressed in this generic article. Where this article is dated then it is based on legislation as of the date. Legislation changes but articles are rarely updated, although sometimes a new article is written; so, please check for later articles or changes in legislation on official government websites, as this article should not be relied on in isolation.

This article was republished on 16th January 2020


Chris Lean

Chris is a Chartered Financial Planner who writes blogs and articles to simplify and explain some of the financial issues that affect UK expats. Subjects include; hot topics, regulation and the ever-changing world of finance.

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