New calculations show how much you need to save for retirement at 25, 40 and 50 years old

​Pension saver looks at laptop

Younger new pension savers can make smaller monthly contributions than those closer to retiring

Jessica Sheldon

By Jessica Sheldon

Published: 08/09/2023

- 12:58

The amount a person needs to save depending on when they start retiring has been calculated ahead of Pension Awareness Week next week

A person who starts saving at 50 will need to make monthly contributions more than four times the size of a new pension saver aged 25, new calculations suggest.

The research also found self-employed workers will need to save more than employees, if they want to achieve a “moderate” retirement.

The calculations are based on the annual PLSA Retirement Living Standards, which estimate a single person needs an estimated pension pot of £36,500 for a minimum retirement, £248,000 for a moderate retirement and £530,000 for a comfortable retirement, while couples need less as some costs are shared.

While a person’s retirement plan will be affected by individual circumstances, experts at flat-fee investment platform interactive investor have calculated how much a person might need to save towards retirement, depending on the age they start saving into a pension.

Person looking at financial statement beside laptop

A person who starts saving at 50 will need to make monthly contributions more than four times the size of a new pension saver aged 25, calculations show


They found the monthly pension contributions needed for single, employed pension savers to achieve different retirement levels are:

Current age: 25

  • Minimum: £23
  • Moderate: £155
  • Comfortable: £331

Current age: 30

  • Minimum: £29
  • Moderate: £193
  • Comfortable: £411

Current age: 40

  • Minimum: £46
  • Moderate: £314
  • Comfortable: £671

Current age: 50

  • Minimum: £87
  • Moderate: £625
  • Comfortable: £1,336

Alice Guy, head of pensions and savings at interactive investor said: “It’s encouraging that, if you start young, you don’t need to save thousands each month to achieve a moderate retirement.

“In fact, someone who starts saving in their twenties can potentially save enough for a moderate retirement with £155 pension contributions each month, which would only cost £124 after tax (assuming they increase their contributions by two per cent each year and enjoy five per cent annual investment returns).

“Their contributions will be boosted to £248 each month after employer contributions. The younger you are, the longer you have to save and the longer you have for investment compounding to work its magic. “

In contrast, someone who begins saving in a pension at 40 years old would need to pay in £314 a month - twice as much as a 25-year-old – to achieve a moderate retirement.

Interactive investor warned that self-employed workers would find it “much harder” to save for retirement as they won’t benefit from employer contributions.

Ms Guy said: “They need to save around 60 per cent more than someone who is employed to achieve the same level of retirement.

The pensions expert also shared some top tips for people who worry their pension pot is “lagging”:

  • “If you can afford it, consider boosting your pension contributions by paying in more than the minimum amount.
  • "If you’re thinking of moving jobs, then take a look at your prospective employer’s pension contributions as well as the salary. Some employers pay in more than the minimum three per cent required and a small percentage boost could make a big difference in retirement.
  • "Check your pension and any ISAs at least annually and discuss your plans for retirement with your partner. Your partner’s pension could have an indirect impact on your plans as couples need slightly less in retirement than single people.
  • "If you’re a homeowner, then consider boosting your pension payments once you’ve cleared your mortgage.
  • "If you can’t afford your current pension contributions, then consider reducing the percentage instead of stopping them altogether and be careful not to lose valuable employer contributions as some employers will stop their contributions if you stop yours.
  • "Don’t forget tax relief. The tax rules mean it only costs £80 to contribute £100 to your pension and £60 to contribute £100 if you’re a higher-rate taxpayer. You’ll also get 25 per cent tax-free when you come to draw your pension.
  • "Check your old pension pots and consider if you could save money and hassle by consolidating old pensions. You need to check first in case you lose any valuable benefits by transferring your pension."

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