Steep increases in the cost of living over the past few years mean anyone relying on old estimates of how much you need to save for retirement could be in for a nasty surprise.

According to the latest research from the Pensions and Lifetime Savings Association (PLSA), the cost of a ‘comfortable’ retirement for a single retiree has risen by 33.5% since 2019, while the cost of a ‘moderate’ retirement has soared by 57.7%1. This has been driven by a range of factors, including higher food, energy and motoring costs, and increased budgets for clothing, eating out and supporting younger family members.

Higher costs are never good news, but as the saying goes, forewarned is forearmed. So, we’ve crunched the data to help you work out how much you really need to save for retirement. 

How much does retirement cost?

Unless you have an idea of how much your retirement is likely to cost, deciding how much you need to save may feel like a stab in the dark. Of course, things may change and your costs could be higher or lower than you anticipated, but it helps to have a ballpark figure. 

The PLSA has devised three ‘retirement living standards’ – minimum, moderate and comfortable – and calculated how much retirees would need to spend to achieve those standards. A ‘minimum’ retirement covers all your needs with some left over for fun and social occasions. A ‘moderate’ retirement provides more financial security and flexibility, including a foreign holiday each year. A ‘comfortable’ retirement allows you to be more spontaneous, perhaps going on a foreign holiday and several UK minibreaks a year.

The table below shows our calculations of how much a 66 year-old retiring today would need to have built up in pension savings in order to fund each retirement living standard until age 100. Not many people will live to 100, so this may not be appropriate for everyone, but underestimating your life expectancy could mean your pension runs out too quickly. While the average life expectancy for a 66 year-old man is 85, there’s a 1 in 4 chance of living to 92 and a 3.1% chance of living to 100. For a 66 year-old woman, average life expectancy is 87 and there’s a 1 in 4 chance of living to 94 and a 5.5% chance of living to 1002.

Our calculations assume each individual qualifies for the full state pension, which is currently £11,500 a year. Remember, income from pensions is taxed at your normal rate of income tax, so the figures below show the amount you’d need to fund each retirement living standard after tax has been deducted.

Pension pot needed to reach different standards of living in retirement

                                              Single retiree Couple
Retirement living standard   Cost per year, after tax                                                            Required pension savings (in addition to state pension) Cost per year, after tax                                                                  Required pension savings (in addition to state pension)
Minimum £14,400 £52,522 £22,400 N/A*
Moderate £31,300 £488,688 £43,100 £442,230
Comfortable £43,100 £804,194 £59,000 £884,460

*Minimum standard of living is covered by two lots of state pension (£11,500 x 2 = £23,000).

Notes: Assumes the state pension rises by 2.5% a year; the required spend increases by 2% a year to account for inflation; average annual investment growth is 5% after costs; and the full state pension is the investor’s only other source of taxable income. We calculate the effective tax rate on pension withdrawals above this amount. Tax bands rise with inflation over time so the effective rate of tax an investor faces remains broadly the same as they escalate their withdrawals. The investor is able to withdraw up to 25% of their pension as a cash lump sum, free from tax (up to a lifetime maximum of £268,275) - they do this gradually over time. 

Source: PLSA, Vanguard.

Bear in mind that the PLSA’s figures are based on averages and won’t necessarily reflect your own circumstances. You could find your spending starts off high as you enjoy your newfound freedom, declines as you get older and then ramps up again if you need to pay for long-term care. Nevertheless, since most of us can’t predict the future, the data is a useful starting point when it comes to setting your retirement savings goal.

How to boost your retirement savings

If you’re facing a shortfall in your pension pot, don’t panic because there may still be steps you can take to boost your savings. Here are three tips to consider:

    1. Top up your pension

Topping up your pension – whether that’s by increasing your monthly contributions or adding a lump sum – could make a big difference to the size of your pot at retirement. Not least because of the tax relief you get on personal pension contributions. For every £80 you contribute to your pension, you’ll get a top-up of £20. If you’re a higher-rate or additional-rate taxpayer, you can claim back an additional £20 or £25, respectively, via your self-assessment tax return. 

Tax relief can really help to supercharge your long-term savings, as we demonstrate in this earlier article.

    2. Start as early as you can

When it comes to saving for retirement, the earlier you start, the better. 

We calculated how much someone would need to save if they wanted £500,000 of pension savings by age 66. That would be more than enough to fund a moderate retirement using the assumptions above. We assumed the investor had a workplace pension3 as well as a low-cost self-invested personal pension (SIPP) and that their salary increased by 3% a year. We also assumed an investment return of 5% after costs.

We found that a 25-year-old earning £30,000 a year would need to invest £90 a month in their SIPP (on top of their workplace pension) to achieve a pot of this size. But for a 50-year-old earning £60,000 a year, they’d need to invest £434 a month into their SIPP, even if they already had £100,000 of retirement savings.

    3. Cut the cost of investing

Pension fees vary enormously from one provider to another and can have a significant impact on how long your savings last in retirement.

One way to potentially reduce investment charges is to consolidate your pensions. That means bringing together all your different pension plans into one pot, such as a Vanguard Personal Pension. By consolidating your pensions, you’ll have just one fee to pay for all your pension savings. It can also cut down on admin and make it easier to know whether you’re on track to achieve your savings goal.

Remember, though, that it may not always be in your interests to transfer out of a pension, particularly if you have a defined benefit (DB) pension or any other guarantees4. If in doubt, it’s always worth seeking financial advice.

Overall, this could be a good opportunity to review your pensions, check how much you’re paying in charges and, if you’re able to, consider increasing your contributions to boost your chances of achieving the retirement you want.


Retirement living standards research report, published January 2024.

Office for National Statistics life expectancy calculator.

We assumed minimum auto-enrolment of 8% of salary between £6,420 and £50,270.

These pay a guaranteed income depending on your final or average salary and are funded by employers. In general, DB pensions are usually not suitable for consolidation.

Vanguard Personal Pension

Learn more about saving for retirement.

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The value of investments, and the income from them, may fall or rise and investors may get back less than they invested.

Eligibility to invest in a Vanguard Personal Pension depends on your individual circumstances. Please be aware that pension and tax rules may change in the future and the value of investments can go down as well as up, so you might get back less than you invested. You cannot usually access your pension savings or make any withdrawals until the age of 55.

Your pension transfer will be sent to us as cash. During this period you will be out of the market (not invested) so you could miss out on any increase in the value of your pension fund should the market rise.

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