How much should I save for retirement?

The answer varies by everyone, and it is heavily influenced by your current income and the lifestyle you desire in retirement. Knowing how much you should save will help you remain on track and attain your retirement objectives.  

The most popular methods of calculating how much you should save are: 

  •  Saving 10 times your typical working-life wage by the time you retire. So, if you earn £30,000 on average, you should aim for a pension plan of roughly £300,000. 
  •  Set aside 12.5% of your monthly paycheck. So, if your yearly salary is £30,000, you would save £312.50 every month, which would establish a pension fund of almost £300,000 over 40 years at 4% growth. 

This is much more possible with a working pension if your company doubles your contributions. You would just need to contribute £125 each month (5% of your salary), which your company would match up to £250. Tax reduction of 20% brings this up to the needed £312.50. 

These are the easy methods for calculating how much you should save for retirement. However, to have a better sense of how much pension fund you’ll need personally, consult a financial planner, like Veracity Financial Planning. 

How much can I contribute to my pension? 

There is an annual allowance (the amount you can pay into your pension each year) and a lifetime allowance (the amount you can pay into your pension throughout your lifetime), both of which restrict the amount you may invest into pensions while still receiving tax relief. 

Generally, the maximum you can contribute to a pension scheme in any one tax year is £40,000 but not more than your annual earnings. If you have no earnings you can contribute up to a maximum of £2,880, to which the government will add tax relief making a total contribution of £3,600. 

You may be able to contribute more than £40,000 if you have had a pension fund in the three previous years but did not contribute the full £40,000. This is called using ‘carry forward’. 
If making a personal contribution you cannot contribute more than your annual earnings in the current year when using carry forward, however if the contribution is being made by your employer or limited company the £40,000 limit can be ignored if the pension contribution is wholly and exclusively for the employer’s trade or profession by HMRC which you would need to check with your accountant. 

Can I supplement my retirement income with additional sources of income? 

If your pension account is insufficient to satisfy your needs – or if you ‘outlive’ the pension fund– you may need to locate alternative sources of retirement income. These might include: 

  • Release of equity (unlocking value from your home) 
  • Downsizing 
  • Renting out a spare room in your home 

If you are unable to accomplish any of these things, or if you do not own your own house, you may be forced to rely entirely on the state pension if your private pension runs out. 

Would you like personal pension advice? 

Veracity Financial Planning offer financial planning and pension advice . Veracity FP typically work with individuals or families who have accumulated, or expect to accumulate, a large value of assets together with a lifestyle that should be sufficient to last a lifetime, but not necessarily sufficient to be unconcerned with the safety and security of their assets and their lifestyle. 

Contact Veracity Financial Planning now. Call 0115 967 0888 or email:


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Woody Snapper

Woody works with individuals and business' looking for corporate finance, high net worth mortgages, complex loans, bridging loans and development finance.

To contact Woody.

Tel: 07922 413586