Surging living costs and rising life expectancy are forcing a rethink of retirement planning across the UK, with new research from Fidelity International (“Fidelity”) revealing that 42% of UK investors plan to increase their retirement savings over the next 12 months. This figure rises to 46% among those aged 55 and over.
Meanwhile, early retirement remains a strong ambition for mid-life workers, with 22% of 35–54-year-olds saving specifically to retire early or reduce their working hours - the highest proportion of any age group.
These goals, however, are set against the backdrop of rising retirement costs. The latest Retirement Living Standards from the Pensions and Lifetime Savings Association (PLSA) estimate that a single person now needs £43,900 a year in post-tax spending - equating to more than £52,000 in gross income - to enjoy a “comfortable” retirement.
What it takes: real-world scenarios
Fidelity’s recent analysis highlights just how much savers need to accumulate to achieve a “comfortable” retirement. One option for generating a reliable income in retirement is to purchase an annuity, which provides a guaranteed income for life. However, the level of income you receive will vary depending on factors such as your age, health, and the type of annuity selected.
For those seeking greater flexibility, income drawdown offers an alternative. To generate the £40,245 a year required on top of the full State Pension - bringing gross income to over £52,000 for a single person’s comfortable retirement - Fidelity’s Pension Drawdown Calculator suggests a starting pension pot of around £700,000 at age 65. Assuming average investment performance, that pot could last until age 90. If returns are stronger, nearly £240,000 could remain at age 100.
Source: Fidelity’s Pension Drawdown Calculator. The tool is for guidance purposes and assumes income growth of 2% a year.
How to build a big enough pot
According to Fidelity’s projections, someone starting at age 25 would need to save £459 each month to reach that goal by 65. Delaying contributions significantly increases the challenge: a 35-year-old would need to save £841 monthly, while a 45-year-old would need £1,703 a month - almost four times the commitment required at 25.
Source: The figures assume that individuals begin their savings from zero and continue until they are 65, achieving a return of 5% a year after all costs.
Ed Monk, Associate Director at Fidelity International, shares a checklist to help those nearing retirement stay on track:
10 years from retirement - lay the groundwork
Check your State Pension forecast - especially with the State Pension age rising to 67 from 2026.
Get to grips with your pension pots - consolidate and calculate projections for pension pots and ISAs to benchmark your progress using updated standards like the PLSA’s.
Boost your savings - the decade before retirement often coincides with peak earning years, use this time to maximise pension contributions and make full use of ISA allowances. Consolidating older pensions may also help reduce fees.
Five years from retirement - protecting your progress
Reassess your investment strategy - don’t de-risk too early if you’ll remain invested into retirement.
Explore your income options - whether via drawdown, annuity, or a combination. Now is a good time to consider how each approach works and the tax implications of each.
Stress-test your retirement budget - compare your likely retirement income to what you’ll need for a “minimum”, “moderate” or “comfortable” lifestyle.
Two years from retirement - finalising the details
Fine-tune your income strategy - decide how and when to draw different pots, and secure essential expenses with guaranteed income.
Review your budget and spending assumptions - check that your expected costs align with your lifestyle goals. Don’t forget to factor in inflation and any remaining debts.
Update your documents - review your will, set up powers of attorney, and plan for long-term care.
Ed Monk comments: “Our research figures show that many people are taking positive steps towards improving their retirement prospects - whether that’s increasing contributions or planning to retire early. But intention alone isn’t enough. With the cost of retirement rising and expectations shifting, it’s vital that savers understand what kind of lifestyle their savings can realistically support. The PLSA’s updated benchmarks provide a useful reference point, and there are clear steps investors can take - whether they’re 10 years away from retirement or making final decisions - to ensure their savings align with the lifestyle they want in later life. Acting early, reviewing progress regularly, and staying flexible as circumstances change can all help build greater confidence in retirement.”
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