What do you need for a comfortable retirement?

What do you need for a comfortable retirement?  New calculations suggest that a single persons needs a pension pot of £738,000.

The new calculations are based on the PLSA’s Retirement Living Standards research which has just been updated to account for annual inflation, perceptions of what constitutes varying levels of retirement and the new State Pension. The research reveals how much people will now need in retirement to achieve a minimum, moderate or comfortable retirement lifestyle.

Quilter’s new calculations show that in one year the size of a pot needed for a comfortable retirement has grown by nearly £100,000. Furthermore, a couple now needs close to a million (£929,000) in joint pension wealth for them both to achieve a comfortable retirement.

In January 2023, Quilter calculated using the PLSA’s previous set of figures that a pot of £645,000 was needed for a comfortable retirement. This is partly down to inflation and also related to changes to the composition of the basket of goods used for the index.

So what  do you need for a comfortable retirement? Now, a comfortable retirement requires a single person to have an annual income (gross of tax) of £39,387 per year on top of the state pension, which in 2024-25 is £11,500 per year.

According to the association, a comfortable retirement consists of a range of measures including being able to go for a fortnight in a 4* holiday in the Mediterranean every year and three UK long weekends and up to £1,500 a year on new clothing and footwear a year. Also this year measures such as being able to gift £1,000 a year to support family members has been highlighted in the PLSA research.

For someone looking to achieve what is defined as a moderate retirement lifestyle, a single person will need to build up a pension pot of approximately £459,000 up from £301,000 compared to last year’s calculations. A moderate lifestyle includes being able to afford £74 a week on food (including food away from the home) as well as two weeks in Europe and a long weekend in the UK every year. Gifting £1,000 to family was also highlighted as a necessity among retirees aiming for a moderate retirement.

Finally, for someone looking to achieve a minimum lifestyle which requires someone to have £3,357 in extra income per year on top of the State Pension they need to have built up a pot of around £63,000. A minimum lifestyle enables someone to spend £50 on a weekly food shop, a week long holiday a year and no car.

What do you need for a comfortable retirement? If you are concerned about any of these calculations and your pension pot, please get in touch.

*Calculations assume an escalating income of 3% based on someone who is aged 66 (which is the current age to receive state pension). All pots rounded to the nearest thousand. For the singles an annuity rate of 5.34% was used. For the Joints it was 4.79%.

** Minimum for a couple is covered by the State Pension

It’s harvest time in the farming calendar, do you know how to harvest your investments for over £30k tax free income a year? Land management has proven that the timing and order in which crops are harvested makes a great deal of difference to the yield. Some factors are relatively predictable, such as when a crop is likely to be ready. Other factors are very uncertain, like the weather.

Investments are similar – markets are unpredictable although tax allowances and rates are more predictable, but not completely. So, when it comes to harvesting your hard-earned money, timing, and the order in which you do this is very important – how to harvest your investments for over £30k tax free income a year. Whether you are in retirement, shortly approaching it, or it still lies some way in the future for you, it can be tempting to assume that you go to your pension first as your source of income in retirement. But beware – taking income from your pension first could mean that you are losing out on significant disposable income.

Many people arrive at the age they want to partly, or fully, retire with a range of assets. These can include cash, property, ISAs, bonds, pension plans such as SIPPs, and maybe some multi asset funds or other investments. As a result, you will have a choice of where to take your income from first. But it’s likely that the best choice is not your pension.

Why is this? Well, it can be complicated. Which is why it’s a good idea to have a qualified financial adviser whose job it is to optimise how you take your income. But to give a simple example:

  • Tax rate on your income from your ISA – 0%1
  • Tax rate on your income from your other investments – normally Capital Gains Tax at 20%, and
  • Compared to the tax rate on your income from your pension – Income Tax at 20%, 40% or even 45% depending upon your income2.

This too is another benefit in organising your retirement income to come from several different pots at different times. It can be a good idea to take more investment risk on the portion of your money that you don’t need immediately. This is because you are more likely to get a higher return on it on average, plus it stays invested longer for that higher return to compound. And it can be even more efficient if this is in a pension because the compounded growth is not taxed.

However, along the way there will be times when investment markets are down, and you don’t want to be to having to sell these investments to take income at such times, which would result in temporary losses. That’s why it’s usually a good strategy to take the higher investment risk only with the money that you are sure you aren’t going to need in the short term and have your ‘essentials’ money come from cash or short-term deposits.

So, it’s about organising your ‘pots’ not just in the most tax efficient way, but in a way which optimises the balance of investment return, investment risk, and timescales for when you will need the money.

It is worth noting too that even when you do finally come to take income from your pension, you can make a massive difference to how much tax you pay depending upon how you take the money from it. This is especially true if you have more than one pension, and a spouse or partner who has pensions too. Factors to consider include your respective ages, how much to take of the tax-free cash allowance, what to leave in flexi access drawdown and with which provider, inheritance tax (IHT) implications, whether and how you can get access to your capital, and death benefit flexibility.

Again, it’s the job of your financial adviser to optimise this for you and show you how to harvest your investments for over £30k tax free income a year. If you’d like to learn more, please get in touch now.


1 https://www.moneyhelper.org.uk/en/savings/types-of-savings/isas-and-other-tax-efficient-ways-to-save-or-invest#:~:text=You%20pay%20no%20Income%20Tax,free%20of%20Capital%20Gains%20Tax.

2 https://www.theprivateoffice.com/insights/pay-tax-on-investment-income-gains#:~:text=Typically%2C%20all%20other%20sources%20of,for%20an%20additional%20rate%20taxpayer.



Approver Quilter Wealth Limited, Quilter Financial Limited, Quilter Financial Services Limited, Quilter Mortgage Planning Limited. September 2023

Britain’s financial watchdog, the Financial Conduct Authority (FCA), has cautioned pension holders to tune in to
scammers’ ‘magic tricks.’ Research shows that the economic squeeze is encouraging more people to withdraw pension savings, with a quarter
of all pension holders considering an early raid due to cost-of-living pressures. This is putting a significant number of people at risk of potential scams. Pension scammers – stay one step ahead – as they are preying on consumers’ misunderstanding of how pensions work and pension pots grow.

Tactics – tune in
FCA research has highlighted consumer vulnerability to some classic ‘distraction’ tactics. For example, around 44% of pension holders said they would take up the offer of a free pension review.

The FCA has compiled a list of common scam techniques to help people avoid falling victim, these include:

– High-pressure sales tactics using ‘time-limited offers’

– Guaranteed higher returns

– Unusual unregulated investments

– Arrangements involving several parties

– Any offer to release pension funds for under-55s.

Devastating consequences
FCA Executive Director of Enforcement, Mark Steward, is urging consumers to visit the watchdog’s ScamSmart website to “avoid being tricked by scammers.” Adding, “Pension scammers = stay one step ahead as they are tricking victims with false promises of a better lifestyle in retirement. Like the magician’s trick, thousands can disappear in seconds, but this time the consequences can be devastating.”

Trust your instinct – if you ever have any doubts when contacted in relation to your pension, get in touch. If it sounds too good to be true, it probably is.

Analysis3 has revealed that stopping or reducing  pension contributions, even for a relatively short time such as a year, can have a significant impact on your final pension pot, with savers potentially being thousands of pounds less well off in retirement. In short, pausing pensions could be costly.

Choosing how to cut back
Almost all (93%) of those who responded to the analysts’ survey said they are feeling the impact of increasing costs and inflation. A further 77% expect to have to make cutbacks on saving or spending. However, an encouragingly low figure of 6% said they planned to reduce their pension contributions.

Thinking of the long term
Whilst it might seem tempting to give up or pause your pension contributions, it’s important to consider the impact any breaks in contributions would have on your retirement pot.

Keeping your long-term plans in mind and maintaining your savings habit wherever possible will help to keep your retirement planning on track. Talk to us before making any major decisions as pausing pensions could be costly.

According to a recent survey by the Pensions and Lifetime Savings Association (PLSA 2021)*

  • 51% of people focus on their current needs and wants at the expense of providing for the future;
  • Only 23% of people are confident they know how much they need to save to be comfortable in retirement.

We can help you build up the funds you’ll need to enjoy your retirement years to the full. We can give retirement income & pension planning advice on personal pensions, getting the most suitable annuity rates, stakeholder pensions, self invested personal pensions (SIPPs), small self-administered schemes and equity release.

3 Standard Life, 2022

Focusing on financial planning for your retirement can be difficult but we can show you how to prep your pension with confidence? If so, you’re in good company – 47% of working age people are a bit lost when it comes to getting their retirement planning on track2

Just over a quarter (28%) feel secure in their understanding of how to manage their pension in the approach to retirement, while only
27% have an idea of what a ‘good’ amount of pension savings is for someone of their age.

Rearing its ugly head again is the gender pension gap. Women are almost twice as likely (21%) to say they feel completely ‘on the back foot’
than men (12%). In addition, women are more than twice as likely to lack understanding of how to manage their pension in the approach to
retirement (34% of women vs 14% of men).

Approach retirement with confidence
Mary Harper, a Managing Director at Aviva commented, “It’s very easy to put thoughts about later life to the back of your mind but investing time in thinking and planning ahead can make a world of difference to your options… evidence suggests that people who access financial advice are, on average, tens of thousands of pounds better off in the long-term.”

According to a recent survey by the Pensions and Lifetime Savings Association (PLSA 2021)*

  • 51% of people focus on their current needs and wants at the expense of providing for the future;
  • Only 23% of people are confident they know how much they need to save to be comfortable in retirement.

Most people during their career accumulate a number of different pension plans. Yet maintaining separate plans is often complicated – and may lead to lost investment opportunities, exposure to undue risk and higher costs.

We can help you avoid these problems with specialist retirement income & pension planning advice. . For instance, by completing a full analysis of your retirement needs and pension values. We can provide advice so you can prep your pension with confidence and approach your retirement with laser focus.2

Aviva, 2021