Just eleven years into retirement, pension savers risk running out of money

The amount that people are expected to have saved for retirement and the retirement income they desire differ significantly

According to a new study, the average saver wants to live on over £30,000 annually in retirement, but their pension fund will only provide them with that income for a little more than ten years before they run out of money.

An average of 253,701 is the personal target pension pot for retirement, according to a survey of 3,000 UK consumers.

However, the report by independent consultants Retirement Review states that the average target for personal annual income in retirement is 30,050 (up from 25,679 in 2023).

A separate article examines the average pension pot by age.

Assuming no lump sum is taken and a balanced portfolio with average growth, the reality is that their target pension pot would probably only last 11 years, giving them their target retirement income.

Given that respondents expected to retire at an average age of 65 and 7 years, they would run out of money by the time they were 77 years old.

As an alternative, they could receive 19,391 annually from an annuity. That is a 35 percent difference in their expected income.

The Retirement Review's Matthew Morris stated that consumers "are severely underestimating the amount they need to save in order to achieve the retirement they want."

If retirees are eligible for the full new state pension, their income should rise by as much as 11,973 annually once they reach state pension age based on current entitlements.

According to the report's authors, "this highlights the value of ensuring savers have the right number of qualifying years in their state pension."

A sizable portion of pension savers simply do not know how to approach their retirement.

The study discovered that one-third of consumers do not know how much they want to save for retirement or how much their current pension pot is.

Although respondents stated that they might be able to retire earlier with the correct guidance, only 6% of respondents expect to retire before the age of 60, and nearly one in five (19%) are unsure they will ever retire.

If they have financial planning, the percentage of people who believe they could retire before the age of 65 rises from 21% to 28%.

What is my expected state pension?

The state pension, which offers a lifelong guaranteed income that increases by at least 2.5 percent annually because of the triple lock, is the cornerstone of most people's retirement plans.

It's crucial to determine your entitlement so that you can adjust your retirement savings because not everyone receives the entire amount.

In the month of April 2025, the state pension increased by 4 percent. This indicates that the payout for those who received the full new state pension increased from 221.20 per week (11,502 annually) to 230.25 (11,973).

The basic state pension, also referred to as the "old" state pension, increased from 169.50 per week (8,814 per year) to 176.45 (9,175).

However, the amount you receive is determined by how many years you have accrued National Insurance contributions (NICs).

You must have the following in order to receive the full basic state pension.

Men born on or after April 6, 1951, and women born on or after April 6, 1953, are eligible for the new state pension. Men born on or after April 6, 1951, are eligible for 30 qualifying years of NICs, while men born between 1945 and 1951 are eligible for 44 qualifying years of NICs. Women born before 1945 are eligible for 30 qualifying years of NICs. To be eligible, you must have at least 10 years of NICs and 35 years to receive the full amount.

You will receive a smaller sum if your record shows contributions from 10 to 34 years ago. If you have 20 years of NICs, for instance, you will receive 20/35ths of the total amount, or 131.57 per week.

If you are employed, NICs will have been deducted from your paycheck by your employer. In addition to topping up your NICs record, some people, such as carers, are eligible to receive National Insurance credits.

Using the government's website's state pension forecast, you can determine how much state pension you are likely to receive.

You can make voluntary contributions to fill in any gaps in your National Insurance record that may be causing your state pension forecast to fall short of the full amount.