Is saving into a workplace pension enough?

Pensions and retirement
Views & insights

A workplace pension won’t necessarily afford you the retirement you desire. Find out why, and what your options are, here.


3 February 2023 | 3 minute read

Saving into a workplace pension is a sensible way of growing your longer-term finances, but it might not necessarily be sufficient to fund the retirement you desire.

If you’re a member of an auto-enrolment pension scheme and contributing at the minimum level, this could leave you short of what’s required for a ‘comfortable’ retirement. What’s more, the specific fund you’re investing in might not suit your retirement strategy.


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A financial adviser can help you decide on the best long-term savings plan for your individual needs but, in the meantime, here are some of the main factors to consider.

Auto-enrolment contributions are low

Although auto-enrolment has extended pension saving to more employees, contributions remain low. Currently, the minimum contribution level is 8% of your ‘qualifying earnings’, of which your employer must contribute at least 3%, with you making up the difference.

Qualifying earnings are set by the government and, for the 2022/23 tax year, are between £6,240 and £50,270 a year before tax. This means someone on a salary of, say, £55,000 would make the same combined pension contribution as someone on a salary of £70,000 – namely, just over £3,522 a year (8% of £44,030).

Our research shows that if you invested £3,522 a year from age 30, your pension could be worth nearly £300,000 at age 66, assuming annual investment growth of 4% after charges but before inflation. This might sound like a lot, but a survey by the Pensions and Lifetime Savings Association suggests that to fund a ‘comfortable’ retirement today, the average single person needs £37,300 a year while the average couple needs £54,500 a year1. According to our analysis, if you kept a £300,000 pension pot invested and started withdrawing £37,300 a year at age 66, and your withdrawals increased annually with inflation, you’d risk running out of money by age 75.

What size pension do I really need?

Our research suggests your pension pot may need to be nearer £700,000 to meet the amount required for a comfortable retirement today. A pot this size could last to nearly age 90, based on the same assumptions as above.

Although many people don’t live to see their 90s, a 66-year-old woman has a one in four chance of living to 94 and a one in ten chance of living to 982. Make sure you don’t underestimate your life expectancy when working out how long your pension money may need to last.

It’s also important to bear in mind that what’s required for a comfortable retirement in, say, 20 or 30 years’ time could be significantly higher than it is today. A financial adviser will take into account inflation when helping you calculate how much you need to save.

What are my options?

Not all workplace pensions are auto-enrolment schemes, so yours could be more generous. An adviser can help you understand what type of scheme you have and how much you and your employer are contributing to it.

Many employers enable you to increase the amount you pay into your workplace pension, and this could prove to be enough to fulfil your retirement ambitions. However, it may be the case that contributing to a self-invested personal pension (SIPP) alongside your workplace pension is better suited to your needs. For example, some workplace pension providers offer limited investment options which might not meet your goals and attitude to investment risk.

It’s also worth considering whether your current workplace pension fund suits your retirement strategy. Some funds assume you will buy an annuity at retirement and therefore reduce your exposure to riskier asset classes as you get older. Yet many retirees choose to enter income drawdown instead, where you leave your money invested and draw an income as and when required. If your workplace fund has been moved to lower-risk investments, these won’t necessarily provide enough growth potential to see you through retirement.

Bear in mind that pensions aren’t the only source of retirement income. If you have ISAs, for example, these could prove to be a valuable and tax-efficient way of funding your retirement because withdrawals are completely tax free. When you start withdrawing money from a pension, 25% can be withdrawn tax free and subsequent withdrawals are taxed at your marginal rate of income tax.

Other potential income sources include the state pension – it’s currently worth just under £10,000 a year for those who qualify for the full rate – as well as cash savings accounts and property income.

Next steps

Your retirement might still be decades away, but taking control of your finances today could have a huge impact on your long-term financial wellbeing. Getting some smart advice could make a real difference to you and your plans for the future. So why not speak to one of our financial advisers today?

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. Neither simulated nor actual past performance are reliable indicators of future performance. 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. Forecasts are not a reliable indicator of future performance.


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