Retirement planning can sometimes feel overwhelming, and many people are unsure about how much they need, whether they're saving enough, or even where to start.

Traditionally, to maintain your current lifestyle in retirement, you should aim for an annual pension that pays an income of around two-thirds (66%) of your final working salary. But it's not always that simple.

For example, if you earn £60,000 before you retire, you should target a retirement income of around £40,000 per year.

Because your living costs typically drop in retirement, for example little or no mortgage, no commuting costs, no more pension contributions, this two-thirds target generally sustains your pre-retirement standard of living.

According to the Pensions and Lifetime Savings Association – UK Retirement Living Standards 2025, a single person will need around £31,700 a year to achieve a moderate standard of living in retirement, and £43,900 for a comfortable one.

And with the full State Pension paying a maximum of £12,547.60 for the 2026/27 tax year, there's a gap that needs addressing.

Tax reliefs referred to are those applied under current legislation, which may change. The availability and value of any tax relief will depend on your individual circumstances.

To bridge the gap between the state pension and the income people want and need, most people will save for retirement by investing in either a workplace pension or a personal pension or both.

If you want to get a better idea of the total personal pension pot you'll need, the “Rule of 25” can help – this means multiplying your annual gap by 25, as shown in the table below.

If you won't be eligible for a full state pension, you'll need to adjust your calculation.

1. Work out approximately how much you might need

As well as using these simple calculations, other things, like your health, whether you own your own home or expect to rent, how much you plan to spend on travel, hobbies and social activities, and whether you may need to support family members financially, will influence the amount you'll need.

You'll also need to consider when you want to retire. Retiring earlier means your savings will need to last longer, while you'll have fewer years to contribute; retiring at 55 rather than 67 could mean funding an additional 12 years without State Pension income.

While a certain amount of money might feel enough today, the cost of everyday expenses like food, energy and travel is likely to rise over time. If you're retiring in 20 or 30 years, your savings and retirement income may need to stretch much further than you expect, so factoring inflation into your plans can help give you a more realistic picture of what you'll need.

2. Find out how much you have already

The Pensions Policy Institute estimates there are around 3.3 million lost pension pots in the UK, worth over £31 billion.

In the modern world, people move jobs more regularly and, with the pace of life increasing all the time, it's easy to lose track of our paperwork and forget things like previous payroll numbers and pension providers. Bringing your pension pots together can help with this, as well as saving you the hassle of lots of extra admin.

3. Save what you can afford and start as soon as you can

A pension remains one of the most tax efficient ways for you to save for retirement. The UK government contributes 20% basic rate tax relief of the total amount invested in your pension. To pay in a total of £1,000 to your pension, you only need to contribute £800, then the government will top up the other £200. If you pay income tax above the basic rate, you can claim even more tax relief through your tax return or by writing to HMRC.

In most cases, you can contribute as much as you earn each year, up to £60,000, or £3,600 if you don't have earnings.

Also, if you're part of a workplace “auto-enrolment” pension scheme, many employers will match the contributions you make, up to a point, so making the most of this is another great way to boost your retirement pot over time.

Paying as much as you can afford into your pension through regular contributions and topping up when you can, such as adding some of your company bonus, can really help to build up your retirement savings. The more time your investments have to grow, the better. 

If you move employer, don't forget to bring your old workplace pension to NatWest so you can see it alongside your other NatWest accounts. It's easier to manage and much more rewarding to be able to see your retirement savings alongside your other savings.