New insights estimate that to achieve a comfortable retirement, you would need a pension pot worth around £757,000 at retirement. As a financial expert, here’s why I’m not worrying about what my pension pot ‘should’ be worth – and why you shouldn’t either. 

This may be somewhat controversial, but I don’t find these huge figures to be that helpful. For many people, it might lead them to think that there is no point saving into a pension because they don’t feel they will ever hit those numbers.


Why should I save into a pension?

As a reminder, pensions in the UK are an incredibly tax efficient savings vehicle for everyone, especially for higher-rate taxpayers. A basic rate tax payer saves 20% tax on the way in and higher rate payers 40%. Your pension can then grow free of capital gains and dividend tax for decades. 

Many raise the valid point that you’ll be taxed in retirement when withdrawing from your pension. While that’s technically true, you’ll get 25% of your pension tax free as a lump sum and you can then use the remaining 75% to pay yourself an income. The first £12,570 of income a year is also tax free – considering the average single person will need around £14,400 for a minimal standard of living or £31,300 for a moderate one, that’s a huge chunk of your yearly pension you can withdraw without paying tax on it. 


What’s most important in pension planning?

Instead of focusing on a mega number my pension needs to be worth in decades time, I’m concentrating on what I can control today. 

  • My contributions. I make sure I’m contributing as much as I can reasonably afford to my pension and get as much from my employer as I possibly can. The half your age pension rule is a great model to figure out how much you should be saving. As an absolute minimum your combined pension contributions with your employer should be in the double digits in terms of percentage. For example, if your employer contributes 3% of your salary to your pension, you’d want to save at least 7%.
  • Employer contributions. Make the most of the employer pension contributions available to you – some employers offer higher contributions than the standard 3% and some will even match your savings. Always make sure you consider employer pension contributions when considering job offers because they can vary wildly. 
  • Find and combine old pensions. I also make sure I know where all my old pensions are and that they are invested suitably in my 20s, 30s and 40s. If I am lucky enough to get a pay rise or a tax cut, I’ll try to increase my pension contributions by 1% if affordable.

If you are doing all of this already, there’s not much more you can do! Together with your State Pension and any other additional income streams, for example from other investments, it will all add up.

Plus, it’s important to remember that your retirement can be whatever you want it to be – there are always alternatives to the traditional ideal of retirement. That could be stopping work altogether or it could be that you choose to continue working in some capacity.

So, don’t get disheartened by the huge numbers you may see in the headlines. Just focus on what you can control today and take advantage of tax relief and employer contributions. 



Important to know

As with all investing, the value of your pension can go up and down, and you may get back less than you invest.

Tax treatment depends on individual circumstances and is subject to change

When deciding whether to transfer your pension, it’s important to compare the charges, investment options & benefits between Moneybox and your old provider. Moneybox cannot accept a transfer from a pension your employer is currently paying into.

Payments you make into your pension won’t be accessible until the minimum pension age (currently 55, increasing to age 57 from 2028).