15 May 2025
Daniel Hough, wealth manager at RBC Brewin Dolphin
With stock markets volatile, inflation remaining stubborn, and questions being asked over the health of the UK economy, many people are thinking about their long-term financial plans – in particular, whether they will be able to save and invest enough to retire.
Thinking so far ahead can be difficult at the best of times, let alone when there is so much going on in the here and now. But it’s important not to lose sight of the long term and ensure what the plans you are making today reflect what you want in the future. So, here are four steps to take to ensure you are on the right track, whatever stage of life you are at.
1. Assess your savings pot
The first step in understanding how long your pension is likely to last is to work out how much you’ve saved so far. This might seem obvious, but it’s possible you’ve accumulated several workplace pensions over your career, some of which you may have forgotten about. Ask your pension providers for an up-to-date valuation, and use the government’s free pension tracing service to track down any lost pensions.
Don’t forget the state pension, which currently pays £230.25 per week (or £11,973 per year) for those who qualify for the full rate[1]. You might also have other sources of retirement income, such as ISAs and savings accounts. A financial adviser can review all your savings and investment pots to give you a true picture of your retirement savings.
2. Consider what age you will retire
Latest figures from the Office for National Statistics show a 66-year-old woman has an average life expectancy of 88 years[2]. However, they also have a one in four chance of living to 94 and a one in ten chance of living to 98. For a 66-year-old man, the average life expectancy is 85 years.
If you stop working at age 66, which is the current state pension age, your savings may need to last for 20 or even 30 years in retirement. Consider whether the pot you have will have the level of sustainability and speak to a professional adviser about how cashflow modelling can help you understand this.
3. Think about your retirement income needs
How much retirement income you need each year will depend on your planned lifestyle. Travelling the world, for example, is likely to cost significantly more than pottering around your garden.
The Pensions and Lifetime Savings Association (PLSA) has calculated that the average single person needs £43,100 a year after tax to fund a ‘comfortable’ retirement, while the average couple needs £59,000 a year after tax[3]. This would cover all your basic needs as well as some luxuries, replacing your kitchen and bathroom every 10 to 15 years, and replacing your car every five years.
Bear in mind that these are average figures. A financial adviser can help you add up your expected outgoings and then explain what level of retirement income this would translate into.
4. Plan for how long that income will last
Our analysis shows that if you retired at age 66 with a £500,000 pension and started withdrawing net income of £43,100 a year (£50,887 before tax), your pot could run out by age 77. This assumes the fund grows at an annual rate of 5 percent after fees and the income increases annually with inflation (assumed at 2 percent per annum). If you retired with a £750,000 pension, your pot could last to age 84.
Remember, the state pension could boost your income by around £11,973 a year, perhaps enabling you to withdraw a lower amount from your personal pensions. If, for example, you started withdrawing net income of £31,127 a year (£38,914 before tax) from a £500,000 pension, your pot could last around four years longer to age 81 (based on the same assumptions as above). For a £750,000 pension, you could still have money left in your pot at age 93.
Understanding how long your pension will last in retirement can provide clarity and peace of mind about your future. But, it is a complex calculation with many variables – and that’s why it’s important to get financial advice from someone who understands your individual circumstances.
Disclaimers
The value of investments, and any income from them, can fall and you may get back less than you invested. This does not constitute tax or legal advice. Tax treatment depends on the individual circumstances of each client and may be subject to change in the future. Information is provided only as an example and is not a recommendation to pursue a particular strategy. Information contained in this document is believed to be reliable and accurate, but without further investigation cannot be warranted as to accuracy or completeness.
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PRESS INFORMATION
For further information, please contact:
Peter McFarlane: peter.mcfarlane@framecreates.co.uk / Tel: 07412 739 093
Siân Robertson: Sian.Robertson@brewin.co.uk / Tel: +44 (0) 20 3201 3026
NOTES TO EDITORS
About RBC Brewin Dolphin
RBC Brewin Dolphin is one of the UK and Ireland’s leading wealth managers and traces its origins back to 1762. With £57.6bn* billion in assets under management, it offers award-winning, bespoke wealth management services, including discretionary investment management and financial planning.
Its qualified investment managers and financial planners are based in over 30 offices across the UK, Jersey and Republic of Ireland, with a commitment to high standards of client service, long-term thinking and absolute focus on clients’ needs at the core.
As part of Royal Bank of Canada (RBC), RBC Brewin Dolphin is now able to draw on the strength of a global financial institution to enhance the services it provides to clients and to drive further innovation across the business.
*as at 31st October 2024.
Disclaimer
The value of investments can fall and you may get back less than you invested.
RBC Brewin Dolphin is a trading name of RBC Europe Limited. RBC Europe Limited is registered in England and Wales No. 995939. Registered Address: 100 Bishopsgate, London EC2N 4AA. Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority.
® / ™ Trademark(s) of Royal Bank of Canada. Used under licence.
About RBC
Royal Bank of Canada is a global financial institution with a purpose-driven, principles-led approach to delivering leading performance. Our success comes from the 98,000+ employees who leverage their imaginations and insights to bring our vision, values and strategy to life so we can help our clients thrive and communities prosper. As Canada’s biggest bank and one of the largest in the world, based on market capitalization, we have a diversified business model with a focus on innovation and providing exceptional experiences to our more than 19 million clients in Canada, the U.S. and 27 other countries. Learn more at rbc.com.
We are proud to support a broad range of community initiatives through donations, community investments and employee volunteer activities. See how at rbc.com/peopleandplanet.
[1] Source: UK Government