If you’re starting to think about what age you’ll be able to afford to stop working, there are several different factors that can help you determine when this might be.
You might be planning to retire at 55, 60 or 65, or at any point in between or after these ages, but you may not be certain how long your retirement savings will last for. After all, the last thing anyone wants is to finish work, only to discover that their pension has run out just a few years later.
Here, we look at what sort of pension pot you might need depending on the age you want to retire. Remember that this is just guidance, and if you want specific recommendations based on your individual circumstances you should seek professional financial advice.
If you’re considering seeking professional financial advice on the options available to you, we’ve partnered with nationwide independent advice firm Fidelius to offer Rest Less members a free initial consultation with a qualified financial advisor. There’s no obligation, however if the adviser feels you’d benefit from paid financial advice, they’ll talk you through how that works and the charges involved.
Fidelius are rated 4.7 out of 5 from over 1,500 reviews on VouchedFor, the review site for financial advisors.
How much do you have in your pension?
Working out exactly how much you have in your pension or pensions should be your starting point when deciding when you can retire.
You can find the current value of your retirement savings on your annual pension statement. This will also provide you with an estimate of how much your pension could be worth at retirement age (usually 65) based on various assumptions, and also how much income it could give you. However, it’s important to remember that no one can predict with certainty exactly how your investments will perform, so these figures shouldn’t be taken as a guarantee of the amount you’ll definitely receive.
If you’ve worked for several different employers over the years, make sure that there aren’t any pensions which you might have missed. You can find out how to locate any missing pensions in our article Tracing lost pensions – How to find my old pensions.
Don’t forget to factor in the State Pension too, although this will only kick in from the age of 66 at the earliest. This is due to increase to age 67 between 2026 and 2028, affecting anyone born in or after April 1960. To help you understand what your State Pension age is likely to be, you can use this tool to tell you when you’ll be eligible to start claiming. You can learn more about the State Pension in our guide How the State Pension works.
The current full State Pension is £221.20 a week in the 2024/25 tax year, and will increase to £230.30 a week in the 2025/26 tax year, although the amount you’ll personally receive will be based on your National Insurance Contribution record. The full basic State Pension is currently £169.50 a week, and this will rise to £176.45 at the start of the new tax year in April.
How much do you need to retire?
Once you’ve got an idea of how much you have in your pensions (and in other savings such as ISAs) your next step should be to think about how much income you’ll need in retirement.
This usually isn’t as much as you need when you’re working, as you won’t generally have things like commuting costs to worry about, and you may have paid off your biggest monthly outgoings such as your mortgage. Any children you have may be nearly grown up and therefore might no longer be financially dependent on you either. As a general rule, most people find they need around 50% to 70% of the income they had when they were working to get by in retirement.
The government’s Money Helper service provides suggested target incomes for different salary ranges as follows:
| Salary range (pe year) | Percentage of salary needed in retirement |
|---|---|
| Up to £12,199 | 80% |
| £12,200 to £22,399 | 70% |
| £22,400 to £31,999 | 67% |
| £32,000 to £51,299 | 60% |
| £51,300 and above | 50% |
For example, if your current income is £40,000 a year after tax, that would mean you’d typically need an income of around £24,000 when you retire. However, this will obviously vary depending on your individual circumstances, and also how comfortable a retirement you would like to have. Find out more in our articles How much do you need to retire comfortably? and £14,400 annual income needed to retire, say pension experts.
How much do I need to retire at 55?
The amount of money you’ll need to retire at the age of 55 depends on a number of factors, including your age now, how much you already have in your pensions and what sort of income you’re looking for in retirement.
If you have a defined contribution or money purchase pension, under pension freedom rules introduced in 2015, you can usually access this money once you reach the age of 55, although this is due to rise to 57 in 2028. That means if you won’t reach the age of 55 until 2028 or beyond this could derail your plans to retire at that age, unless you have savings outside your pensions.
According to Hargreaves Lansdown’s pension calculator, someone currently aged 51 earning £30,000 and who wants to retire at age 55 would need a substantial pension pot of £537,000 if they wanted an annual retirement income of £20,000 when they stop work, a figure that is likely to be wildly out of reach for most people, which is why most people tend to work for longer.
This assumes they take a 25% tax-free lump sum from their pension, equivalent to £134,000. However, if they opted not to take a lump sum, their annual income would be higher at £26,700. Learn more about the pros and cons of taking your tax-free cash early in our article Should I take a tax-free lump sum from my pension at 55?
These numbers assume annual investment growth of 5% and an inflation rate of 2%.
Remember that if you choose not to take your 25% tax-free cash as a lump sum, another option may be to take smaller regular amounts from your pension, so that 25% of each of these payments will be tax free. For example, if you took £1,000 from your pension each month, £250 of this would be tax-free whilst the remaining £750 is taxable. Find out more in our guide How much tax will I pay when I withdraw my pension? You can find out more about early retirement in our guide How can I manage the financial impact of early retirement?
How much do I need to retire at 60?
If you were to push your retirement date back to 60 rather than 55, and assuming the same £30,000 salary, you’d need a smaller overall pension pot of £370,000 to provide you with the same £20,000 at retirement. If you wanted to take a 25% tax-free lump sum from your pension, your annual income would reduce to £15,000, with tax-free cash of £92,500.
This assumes that your current age is 51, so you have nine years to go before you retire and that your pension pot at the moment is valued at £311,000. It also assumes you and your employer are making contributions into your pension each month equivalent to minimum auto-enrolment limits (so you are paying in 5% a month or £125 and your employer is contributing 3% or £75 a month).
If you were able to increase your contributions by £100 a month, you’d be looking at a higher estimated pension value of £381,000 at retirement, which would potentially provide you with an annual income of £20,700. Again, the State Pension isn’t factored in, because a retirement age of 60 is before State Pension age.
How much do I need to retire at 65?
Delaying your retirement until you reach the age of 65 and using the same example £30,000 salary, you’d need an overall pension pot of £331,000 to provide you with the same £20,000 at retirement. If you wanted to take a 25% tax-free lump sum from your pension, your annual income would reduce to £15,000, with tax-free cash of £82,600.
Again, this assumes that your current age is 51, so you have 14 years to go before you retire and that your pension pot at the moment is valued at £245,000. It also assumes you and your employer are making the minimum auto-enrolment contributions into your pension each month. You can learn more about auto-enrolment in our guide How does pension auto-enrolment work?
If you were able to increase your pension contributions by £100 a month, you’d be looking at a higher estimated pension value of £349,000 at retirement, which would potentially provide you with an annual income of £21,100. Again, the State Pension isn’t factored in, because a retirement age of 60 is before State Pension age.
However, if you waited until the age of 67 to retire, and you’re eligible for the full State Pension, your estimated annual income would jump to £35,800 once this is factored in.
A final thought…
There are a huge number of variables which will determine the age at which you can retire, so it’s often impossible to work out a firm stop date. One option many people consider is phasing retirement, so that they have peace of mind that they still have money coming in to supplement their savings. Read more about this in our guide Is phased retirement a good idea?
If you’re not sure at what age you’ll be able to retire based on your current retirement savings, it’s well worth using an online pension calculator to help you crunch the numbers. Our article Five of the best pension calculators to help you plan for retirement gives a rundown of some of the most useful.
It’s also worth reading our guide What income could a pension worth £100,000, £150,000 and £500,000 give you? If you’re looking for an idea of roughly what sort of income your pension savings might provide you with.
If you’re considering seeking professional financial advice on the options available to you, we’ve partnered with nationwide independent advice firm Fidelius to offer Rest Less members a free initial consultation with a qualified financial advisor. There’s no obligation, however if the adviser feels you’d benefit from paid financial advice, they’ll talk you through how that works and the charges involved.
Fidelius are rated 4.7 out of 5 from over 1,500 reviews on VouchedFor, the review site for financial advisors.
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