How Much Income Will You Need in Retirement?

Most retirement plans begin with: “Is my pension enough?”

That starts at the wrong end. Before deciding how large your pension needs to be, work out how much you expect to spend. Only then can you compare that target with your State Pension, workplace pensions, ISAs, savings and other income.

Why read this? When deciding when to retire just looking at your pension, is only half the answer. Considering your expenditure will give you the full picture.

The quick answer

Pensions UK’s Retirement Living Standards provide a useful starting point. Updated in June 2026, they estimate the following annual spending for people living outside London:

These are spending figures after tax. They don’t include rent, mortgage payments, social care, dependants or pets, so your own target could be much higher. See the 2026 Retirement Living Standards.

Our view is simple: use the standards to start the conversation, but build your plan from your own spending.

What does each retirement standard buy?

The labels can sound rather vague, so the spending behind them matters.

The Minimum standard covers basic needs with a little left for leisure. It allows for a UK holiday, a monthly meal out and some affordable social activities.

The Moderate standard adds more choice. It includes an annual overseas holiday, a long weekend in the UK and more regular meals out or takeaways.

The Comfortable standard allows more travel, extra days out and greater freedom to spend on social activities and other luxuries.

Couples don’t need twice the income of one person because they share many household bills. Heating a home, paying for broadband and replacing a washing machine rarely cost twice as much simply because two people live there.

The standards describe broad lifestyles. Someone who rarely travels but spends heavily on a hobby may need a different budget from someone who wants several holidays but runs one small car.

The costs that can change the answer

The published figures assume you have no rent or mortgage to pay. That assumption will not suit a growing number of retirees.

You need to add your own estimate for:

• rent or mortgage payments;
• help for children, grandchildren or other dependants;
• pet costs;
• social care and home adaptations;
• major purchases, such as replacing a car, boiler or roof.

These additions can be large. A household paying £1,000 a month in rent needs another £12,000 a year after tax before considering service charges, moving costs or future rent increases.

Start with spending, not salary

Some retirement calculators suggest replacing 60% or 70% of your salary. That may offer a rough check, but it can miss badly.

Suppose two people earn the same salary. One is paying a large mortgage, commuting daily and putting 15% into a pension. The other owns a home outright, works nearby and saves very little. Their present incomes match, yet their retirement spending needs may be nowhere near each other.

A better method is to review the last 12 months of bank and credit-card statements. Start with what you actually spent, then make four adjustments:

1. Remove costs that should end, such as commuting, pension contributions and a mortgage that will be repaid.
2. Add costs that may rise, including holidays, hobbies, days out and heating the home during the day.
3. Allow for irregular bills. If you expect to spend £21,000 on a replacement car every seven years, add £3,000 a year to the plan.
4. Keep a separate reserve for the expenses you can’t schedule neatly, rather than pretending they won’t happen.

Work in today’s money. If your target is £45,400 and retirement is ten years away, don’t mistake £45,400 in 2036 for the same spending power. At 2.5% annual inflation, the cash amount would be roughly £58,100, although both figures represent the same lifestyle at their respective dates.

One retirement income figure is too neat

Your spending and income will change as retirement develops.

During the first years, you may spend more on travel, hobbies or helping family. Later, travel costs might fall, while health, care or home-support costs rise. Don’t assume lower spending later in life will rescue an underfunded plan.

Income also begins at different times. A person retiring at 62 might use a defined contribution pension, ISA and cash for several years before the State Pension starts. A defined benefit pension may begin at 65, while their partner’s State Pension may not start until later.

Build the plan in phases:

• the years between work ending and State Pension age;
• the period after State Pension and defined benefit pensions begin;
• later life, when spending priorities or care needs may change.

This often reveals that the difficult period isn’t the whole of retirement. It is the gap between stopping work and guaranteed income starting.

Allow for tax: spending and income are not the same

The Retirement Living Standards show the amount a household spends after tax. Most pension income is taxable, so the gross income required can be higher.

For 2026/27, the standard Personal Allowance is £12,570. The full new State Pension is £241.30 a week, or £12,547.60 a year, which uses almost all that allowance. Your actual State Pension may differ, so check your personal forecast rather than assuming you will receive the full amount. Check the current State Pension rules and Income Tax bands.

Pensions UK estimates that a single person needs gross income of about £37,732 to support the Moderate spending target of £32,700. For a two-person household, the comparable gross income is about £50,464, assuming the income is shared equally and both people receive the full State Pension.

Those calculations use standard UK tax assumptions. Scottish Income Tax bands differ, and the answer also changes if you draw money from ISAs, tax-free pension cash or taxable investments.

A worked example: a couple aiming for a Moderate retirement

Suppose a mortgage-free couple wants £45,400 a year to spend, using the Moderate standard as its starting point.

Once both receive the full new State Pension, they would currently get about £25,095 a year between them before tax. Pensions UK estimates that they would need a further £25,368 of gross annual income from their own pension savings to meet the Moderate target, under its stated assumptions.

If they retire five years before their State Pensions begin, the early part of the plan looks very different. Their private pensions, ISAs and cash must initially fund almost all their spending. Once the State Pensions start, the amount taken from those assets can fall.

Now suppose one partner also has a £15,000-a-year defined benefit pension. The amount required from investments falls again. Add £12,000 of annual rent instead, and the target rises sharply.

That is why your retirement date cannot be tested using one pot value and one withdrawal percentage.

How much pension pot might you need?

Your spending target is not the amount your investment portfolio must provide. First deduct income that does not depend on selling investments:

• State Pension;
• defined benefit pensions;
• annuity income;
• earnings, rental income or other dependable payments.

The remaining gap may need to come from a defined contribution pension, ISAs, cash and taxable investments.

Pensions UK’s 2026 guide estimates that a single person targeting the Moderate standard might need a defined contribution pot of roughly £335,000 to £505,000 after allowing for a full State Pension. For a couple, it estimates £170,000 to £255,000 each. These figures use annuity income of around £5,000 to £7,500 for each £100,000 of pension savings; age, health, annuity terms and market rates will affect the quote. Read the pension-pot assumptions.

Drawdown works differently because the money remains invested and the income is not guaranteed. Investment returns, fees, inflation, retirement length and the order of market gains and losses all affect how long the pot lasts. Our guide, How Much Can You Spend in Retirement?, examines those choices.

What if your expected income falls short?

Finding a gap doesn’t mean retirement is impossible. It tells you what needs attention while you still have choices.

You might increase pension contributions, check whether an employer will match more, retire later, phase retirement through part-time work or reduce the flexible part of the budget. Also check for lost pensions and gaps in your National Insurance record. Small changes made early have more time to work.

Don’t respond by assuming an unrealistically high investment return. A plan that only works if markets are kind isn’t much of a plan.

Your retirement-income action plan

1. Choose a starting benchmark: Minimum, Moderate or Comfortable.
2. Review 12 months of actual spending and remove costs that should stop.
3. Add housing, travel, gifts, major replacements and other costs the benchmark misses.
4. Set separate targets for the years before and after your State Pension begins.
5. List every income source, its start date, whether it rises with inflation and how it is taxed.
6. Review the plan each year and after any major change to work, health, housing or family commitments.

Once you have an annual target, use the Clearly Investments When Can I Retire? calculator to compare it with your projected pension. The calculator’s annual income estimate uses a 4% withdrawal and shows the result before tax, so add your other income and compare the figures on the same basis.

The Clearly answer

Don’t ask only, “How much pension do I need?”

Write down the life you want, price it in today’s money and divide the plan into the periods before and after guaranteed pensions begin. Use £32,700 for one person or £45,400 for a couple as a sensible Moderate benchmark, then replace the generic assumptions with your own.

The aim is not to predict every bill for the next 30 years. It is to reach retirement with a spending range, a map of where the income will come from and a plan that can adjust when life changes.

Figures checked August 2026. This article is for education and general information, not personal financial advice. Pension, tax and benefit rules can change. If you need help choosing pension benefits or investments, consider regulated financial advice. MoneyHelper also offers free guidance and a retirement pension calculator.