The Pension Series: How to make sure you have enough money to retire

October 2020

The Pension Series: How to make sure you have enough money to retire

The thought of retirement can either fill you with dread or with excitement. Some can’t wait to quit the rat race and enjoy a quieter life, while others can’t imagine not working in some way. Whichever category you fall into, having enough money to retire on is something on all our minds. In the third instalment in our Pension Series, we look at what you can do to make sure you do have enough. If you want a personalised assessment, please get contact our team of independent financial advisers. You’ll find us on and ready to help.

What is enough?

This is a very subjective and personal question. We all have different lifestyles, needs and things we enjoy doing, and our outgoings will reflect those. Generally speaking, there are three categories that cover retirees’ typical lifestyles:

  • Having the essentials. Your lifestyle is less about big trips abroad and spending lavishly on new clothes and entertainment and more about staying closer to home. Your bills will likely be lower – you may have paid off your mortgage, for example. You are also less likely to still be paying for your children’s education or have other large expenses.
  • Greater comfort. A more comfortable lifestyle is simply one where you enjoy getting out and about more. This usually involves some short-haul travel or more frequent nights out. You may also still have some big bills to pay off each month.
  • A luxury lifestyle. If you love at least one long-haul trip a year with a few short-haul ones or weekend breaks away, you’re probably more in the luxury lifestyle category. You may also want to splash out on big-ticket items, such as a new car or holiday home.  

Rule of thumb for pension income

Regardless of lifestyle preferences, most people mistakenly think that they need the same amount to live on as they do while they working. The truth is that you can live comfortably on less. You have fewer outgoings – no mortgage, or a much reduced one if you have downsized, and your commuting costs will have all but disappeared. You also won’t be making any further pension contributions.

The rule of thumb is that you will need about half to two-thirds of your after-tax working income in retirement. While this will depend on your individual circumstances, with lower living costs you won’t need as much as you think.

Pension income sources

Keep in mind that whatever stage you are at on your retirement path, there is still time to do something about it. Your potential pension income could come from any combination of these sources:

  • State Pension. Assuming you qualify for the new State Pension, this is currently £175.20 per week. This is an annual income of approximately £9,000. If you qualify for the basic State Pension, this will be a little higher.
  • Stakeholder or personal pension scheme. This will vary depending on your personal circumstances.  You may even have more than one pension pot if you changed employers.
  • Other income sources. This could from rental property, investments or savings. The income from such sources could vary over time.
  • Part-time work. You may choose to continue working part-time or even on an ad hoc basis. This is still contributing to your overall annual income in retirement.

Calculating what you need

Planning for retirement is crucial. It will give you peace of mind that you will have enough money to live on and that you will not run out of cash. Start putting a pension plan in place so you know who will have enough money by:

  • Calculating your likely outgoings. This should cover essential costs such as mortgage or rent payments, food, and bills.
  • Considering how those may change in the future. You may need a little more to cover care costs or insurance premiums.
  • Keeping in mind that your spending habits will also change. Over time, you’ll spend less on travel and entertainment and more on your home and on healthcare costs.
  • Not forgetting to factor in inflation and tax. Your pension income is taxed, and inflation will lead to price rises over time. These need to be considered in your calculations.
  • Reviewing your pension regularly. Reviewing your pension savings will help you determine whether you need to do more to ensure you have what you need when it’s time to retire.

It’s never too late to start saving

Whatever your age and whichever stage you’re at in your career, it’s not too late to start saving for a pension. If you are unsure where to begin, start by talking to one of our Plutus Wealth qualified independent financial advisers. You can call us on 020 7871 5200 or email us at and we’ll get you set up for retirement.


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