What is the average pension pot by age in the UK?

In a survey last year we found a majority of the people asked were confused about how the pension system works so we’ll take some time to recap the rules.

• To qualify for the New State Pension you need 35 years’ qualifying National Insurance contributions.
• If you have less than 10 years’ contributions, you will get no pension.
• Anything in between earns you a proportion of the full amount.
• You earn qualifying contributions from employment and from claiming some working-age benefits.

How much will retirement cost?

Before we look at how much different age groups have got saved towards retirement, let’s think about how much you are likely to need.

Each year the University of Loughborough and the Pensions and Lifetime Savings Association (PLSA) issue what are known as the Retirement Living Standards. These aim to calculate the amount you need to spend to achieve various standards of living in retirement. This is how much you need to spend before income tax. The numbers they calculated at the end of the calendar year 2023 were:

Source: Lifetime Savings and Pension Association, Retirement Living Standards 2024

The full New State Pension will pay £11,502 in the current tax year which is clearly not enough for a single person to lead even a very basic lifestyle in retirement. A couple who both qualify for the New State Pension would fare better with enough left over for extra treats. But it means most of us will all have to rely on our own resources if we are to enjoy our third age to the full.

The state retirement age is 67 (rising to 68 by 2028). Meanwhile, the Office for National Statistics (ONS) calculates the average lifespan in 2024 for a moderately healthy 67-year old man to be 85 and for a woman it is 88. We we’ll take 20 years as a rough guide to the length of time the average person will spend in retirement.

How much do we need to save towards retirement?

Based on the shortfall in annual income and a retirement period of 20 years, we can calculate the additional amount of money we might need to cover the difference. Importantly, these figures are stated in today’s terms, so don’t take account of rises in inflation.

Source: Charles Stanley

However, this is only a guide based on the situation today. There are three unknowns we need to consider:

• We cannot know what the future holds in terms of State Retirement Age and longevity.
• We cannot know what inflation will look like in the future and over the twentyish years we are retired. It could increase to over 10% again. In fact, the LPSA lifestyle spending figures for 2023 are about 30% higher than they were at the end of 2022, a sign that even official inflation numbers do not tell the whole story. It therefore pays to understand your personal inflation rate and learn how to calculate it.
• The third is it assumes your retirement pot is a static lump sum. Some kinds of pension arrangements allow your money to remain invested while you draw down what you need so there is the potential for your savings to continue growing throughout your retirement.

There is a final variable to consider: your housing situation. Most retirement estimates assume you own your own property and are mortgage free. Mortgage rates reflect Bank of England interest rates which in turn respond to the official level of inflation. But increases in private rents have historically been higher than mortgage rates and nearly always upwards.

Common types of retirement income

There are four main ways of funding your retirement to consider:

• The State Pension is a quantifiable amount you can rely on throughout your retirement. If the triple lock remains in place, you can be assured it will always increase ahead of the official rate of inflation.
• You might have been a member of defined benefit schemes. These pay a pre-determined income for the rest of your life based on your years with the company and your salary. Although payments usually increase with inflation each year, they don’t always do so.
• If you currently work you will most likely be enrolled in a defined contribution scheme. You and your employer pay a certain amount into a personally allocated fund to generate a pension pot based on how much is contributed and any investment returns.
• Private pensions, ISAs and other investments – including property – are the fourth strand in any retirement strategy.

The first two are fixed and give you some idea of the baseline income you can expect to receive. How you manage the balance is down to your strategy for accessing your defined contribution schemes and personal savings. You could also choose to convert your savings to an annuity – a guaranteed income for life – but these aren’t always good value when interest rates are low. Alternatively, you could leave them invested and take an income or lump sums as you need them. This is called drawdown.

Some sobering pension statistics

• Over 1 in 5 UK adults (21%) have no pension savings. Shockingly, a sixth of people over 55 (17%) have not put anything aside for retirement.
• Almost half (47%) of UK adults have stopped paying into their pension at some point. The most common reason has been the rising cost of daily expenses and bills, rent, and mortgage payments during the recent cost-of-living crisis. But some have stopped paying into their pension due to illness or changing jobs.

Average pension pot by age in the UK – how are you faring?

This isn’t about how much you have saved relative to those around you, it’s about how you manage your retirement plan to make sure you achieve the retirement you want. Comparing ourselves to others can cause unnecessary anxiety if we are on track to achieve our personal life goals. But it can highlight some trends and teach us what we could do better.

Even if retirement is many years away, the steps you take today can make a huge difference to your quality of life in the future.

All the following data is taken from the 2022 release of Pension wealth: wealth in Great Britain, from the ONS.

Here’s a quick summary of the findings before we go into detail about each age group in the paragraphs that follow.

Source: ONS, Charles Stanley

What is the average pension pot for someone in their 20s?

As you might expect, people in their twenties are just starting out on their retirement planning journey and their savings figures are quite low:

Already women are worse off than men with just over half the savings of their male colleagues. This is a theme that will see repeated time and again. There are many reasons for this including women still being paid less than men to do similar jobs (the gender pay gap), more women working in low-paid industries, and more women in part-time work. Women are more likely to take a career break to care for children or elderly parents, and they are also more likely to return to work in lower paid or part-time jobs after doing so.

You are probably auto-enrolled in a company pension scheme even if you’re not aware of it. Since 2012 almost all employers have to offer their workforce some kind of pension. Your employer will be paying in at least 3% of your total salary and you will be contributing 5% for a total of 8%.

As a general rule of thumb, someone starting out on their retirement journey needs to put aside about half their age as a percentage of their salary. So in your twenties you should be saving 10-15% of your salary each month. The good news is you don’t need to increase the percentage you put away as you age. Paying this percent in for the rest of your life should get you most of the way there.

Starting early, even paying in small sums, gives you a better chance of reaching your retirement goals. This is because the power of compounding – earning returns on previous returns – and the fact you will be invested for forty or more years mean time is on your side.

Speak to your employer about contributing more than the minimum amount. Some companies will match these additional sums to a maximum amount. And you will get tax relief from the government on the amount you pay in. Think of that as free money.

Read more: How to manage finances in your 20s

What is the average pension pot for someone in their 30s?

Your 30s are often the peak years for disposable income. You are likely to be well on your way in your career and have a partner sharing the household bills. You might even have a very young family. Women still have less saved than men. Compounding in this case works against women as men’s higher levels of savings mean they will move further ahead faster.

Now’s your chance to really turbo-charge your savings. Try to save and invest as much as you can afford. Prioritise your workplace schemes to maximise matching contributions from your company and the associated tax relief. But also think about taking out a SIPP or an ISA. Both provide tax-free returns while you invest but have different tax regimes so the benefits will vary according to your circumstances.

You should also bear in mind that you can’t touch your pension until you reach the age of 57 (rising to 58 in 2028) so ISAs can offer more flexibility if you think you might need to draw on your savings earlier.

If you haven’t started saving for retirement you should think about putting aside 15-20% of your salary every month. That can be a tall order, but you still have 30 to 40 years ahead of you.

Read more: Should you save in an ISA or pension for retirement?

What is the average pension pot for someone in their 40s?

You are now roughly halfway through your working life. You might be at the height of your earning power, but your household expenses may also be high, especially if you are paying school and/or university fees.

People are more likely to divorce in their forties and this can have a very detrimental effect on the future finances of both parties but particularly women. Make sure pensions are discussed in full as divorced women retire with a tenth of the savings of a divorced man. And remember, women will have to make that pot stretch further due to their increased longevity.

You may also have several pension pots. It has been estimated the average Brit will have between 10 and 12 employers during their working life, leaving a trail of pension schemes in their wake. Take an audit of all your schemes’ values. You should receive an annual statement from the trustees. If you haven’t heard from them in a few years, it could be because they don’t have up-to-date contact details for you. The government has a website where you can find the addresses of historical pension schemes.

Read more: Financial planning in your 40s

What is the average pension pot for someone in their 50s?

Here’s what the average UK pension pot looks like for those over 50 years of age:

It’s time to seriously think about your retirement plans and whether they are affordable. You are approaching the minimum age at which you can access your pension savings. Many people dream of an early retirement, but you will have to fund yourself for up to 18 years before you can claim the State Pension. It is clear the “average” pension pot will not be able to provide this level of financial support.

If you have several pension schemes think about consolidating them into fewer, larger pots to make them easier to administer. Consider which scheme offers the best benefits at the greatest value. Some older schemes don’t allow you to access savings until you reach State Pension Age so look at whether it is worth moving those first. You won’t generally be able to move any defined benefit schemes, however, and it’s not usually in a person’s interest to do so.

You should also check their investment strategies; default schemes might not be appropriate for your current objectives and risk tolerance. How would you cope if there was a sharp fall in the value of your investments just before you decide to retire?

Speak to your employer about transferring in. Employer-sponsored pension schemes often negotiate better fees from their providers and although this might represent a small change it could make a difference down the line.

Read more: Financial planning in your 50s

What is the average pension pot for someone in their 60s?

This is the size of the average UK pension pot at the brink of retirement:

This is about half the amount you need for a moderate retirement if you are a single man (58%) and just over a third of what you need (39%) as a single woman. As a married heterosexual couple, the combined amount will just about do (95%).

So what are your options? You could consider taking a semi-retirement to work part time. You could take on a consulting role that allows you to choose when you work with periods of personal time between contracts. You could continue working. You could also scale down your retirement plans. Finally, if you own your own property, you could think about downsizing to release equity in your home.

Read more: Financial planning in your 60s

Financial plans for retirement

If you’d like help from a financial planner, Charles Stanley Direct Financial Plans can help you understand where you are today, where you need to be and create a roadmap to help you get there for a fixed fee of £900 including VAT.

Book a free consultation call