How much will I need?
At a glance
How much you’ll need from the Plan in retirement depends on a lot of factors, including:
Will you have income from other sources, such as another employer’s pension? And remember to include your State Pension.
How much money will you need? Think about which expenses will be less than while you’re working, which might be more, and which will be about the same.
Pensions from other employers
Pensions from other employers could be a key part of your retirement planning, especially if you’ve worked in a number of different jobs. It can be hard to keep track and many people forget about one or two, especially if you were paying into them a long time ago. The Government has a pension tracing service that can help you find any pensions you might have lost track of.
Your State Pension
If you’ve paid National Insurance (NI) contributions for at least 10 years, you’ll be entitled to a State Pension. (This will also apply if you have at least 10 years of NI credits, e.g. due to sickness or taking time off as a caregiver.) You need at least 35 years’ NI contributions to receive the full new State Pension – if you have less than this, the amount will be reduced. The amount will also be reduced if you’ve been a member of a ‘contracted out’ pension scheme before 6 April 2016, as the Plan was. Check how much you’ll get.
Your State Pension age might be different to your normal retirement age in the Plan or any other pensions you might have, so you’ll need to think about how this could affect your retirement. Check your State Pension age.
Any other savings
Remember any other sources of income you might have, as well as your pension. Whatever it might be, try to include everything in your planning. You can find advice on planning your retirement at the Government’s MoneyHelper website.
It can be difficult to think through how much you’ll need in retirement, especially if it feels like it’s a long way off, but there are plenty of tools available to help you.
As a guide, the Pensions and Lifetime Savings Association have researched the average that people need to provide three standards of living – they’ve referred to these as minimum, moderate and comfortable. You can find out more on their site.
Which has also created a similar guide, and their site has lots more information, as well as tools that you can use to model how much you’ll need.
You can also use the tools available at MoneyHelper.
If you don’t feel you have enough to retire on
If your pension benefits (including pension from all sources) aren’t going to be enough for a comfortable retirement, you have a few options:
Can you afford to pay more into the Plan (if you’re an active member)? Find out more about your contribution options.
Could you retire later? This will mean that you have longer to pay into the Plan, and your benefits would be expected to last for less time.
Have you checked that your investments are invested appropriately? If you’ve chosen one of the self select funds that is expected to grow at a rate less than inflation, for example, this might not be the best option (unless you’re close to retirement).