How Much Do I Need to Retire Comfortably in Scotland?
There is no single pension figure that guarantees a comfortable retirement.
While a sum of £300,000 could be sufficient for someone of retirement age intending to live alone, for others the sum could be woefully inadequate.
The reasons for this include factors such as the planned retirement date, the proposed standard of living in retirement, other sources of income expected to be available in retirement and, of course, housing costs.
Pension planning should be about helping people to achieve the retirement that they have worked for all their lives, rather than being focused on reaching an arbitrary pension target.
Here we discuss in more detail what a comfortable retirement looks like today and explore in more detail how much one needs to fund their retirement in order to achieve their objectives and how much income the State Pension could deliver.
Need help with retirement planning in Scotland? AB Vision can help.
What Does a Comfortable Retirement Look Like?
PensionsUK’s Retirement Living Standards detail three different ‘standards’ for a single person’s or couple’s retirement, based on the annual amount of money they need to spend in order to sustain the quality of life that they wish to lead.
| Retirement standard | One-person household | Two-person household |
|---|---|---|
| Minimum | £13,900 a year | £22,500 a year |
| Moderate | £32,700 a year | £45,400 a year |
| Comfortable | £45,400 a year | £62,700 a year |
A minimum lifestyle would allow for some leisure activities but generally would not have enough for some other activities. A moderate lifestyle would allow for an annual overseas holiday, for example, as well as meals out and other activities on a regular basis.
With a comfortable retirement, you can look forward to enjoying more luxurious activities, and traveling frequently. You will also have the financial security to handle any unexpected expenses.
These figures represent estimated annual spending after tax. They are not gross income targets and do not include costs such as rent, mortgage repayments, social care or financial support for dependants.
You can read more about what is included in the Retirement Living Standards by clicking on the link to the Pensions UK website.
How Are Housing Costs (Mortgage / Rent) Included in Retirement Planning?
Rent and mortgage payments are not included in these figures. In reality, you will need to include the repayments on any mortgage on your home in your retirement expenditure, as well as any service charges and the potential for repairs to the property. This could be a further £9,600 a year over and above the figures provided above, for example, £800 a month housing costs
The Retirement Living Standards were designed with the assumption that by the time of retirement, individuals will have paid off their mortgage for their home. Therefore, for those who are still repaying a mortgage on their home, this will form part of their retirement spending.
Unless your retirement savings will have paid off the mortgage before you retire, we should include the costs of housing (rent and mortgage repayments) within your retirement budget planning. How much could housing cost in retirement and how might this change over time as interest rates change and service charges increase?
As an example of how the cost of a mortgage could affect your retirement, if you expect to still be paying off your mortgage when you retire, it is worth reviewing your current repayment plans with a qualified mortgage advisor before you stop working.
How Big Does My Pension Pot Need to Be?
Annual income and pension pot size are two different figures.
Pensions UK outlines the amount of defined contribution pension savings that a single person will require at each Retirement Living Standard. Here, we have assumed that the person retires with the full new State Pension, and uses their pension savings to purchase an annuity.
| Retirement standard | Estimated defined contribution pension pot |
|---|---|
| Minimum | £23,000 to £34,000 |
| Moderate | £335,000 to £505,000 |
| Comfortable | £560,000 to £845,000 |
These estimates assume a single person receives the full new State Pension and uses their defined contribution pension to purchase an annuity. They are based on general UK tax assumptions and are not specifically calculated using Scottish Income Tax bands. Actual requirements will depend on your tax position, age, health, annuity rates and chosen retirement-income strategy.
The ranges are wide because annuity income can vary according to factors such as age, health, product features and market conditions. Flexible drawdown works differently because the income is not guaranteed and the remaining pension stays invested.
Other pension holders will use their pensions to purchase an annuity whilst others will utilize flexible drawdowns or take out lump sums from time to time. It is only by looking at all of the different ways in which one can use their pension savings that you can reach a proper view as to how much you will need.
It’s worth noting that the above illustrations will provide a rough guide as to how much is required to fund a certain lifestyle in retirement. In order to provide the best pension planning advice, we will need to consider your planned use of your pension funds as well as the amount you have saved.
How Much Will the State Pension Contribute?
The full new State Pension for 2026/27 is £241.30 per week, which equates to around £12,547.60 per year, for a single person.
However, not everyone will receive the full New State Pension. Many people will receive less depending on their individual National Insurance contributions. As previously mentioned, those who were contracted out under the previous State Pension system, will also receive less.
The GOV.UK State Pension forecast will show:
- When you are expected to reach State Pension age
- How much you could receive
- Whether there are gaps in your National Insurance record
- Whether there are gaps in your National Insurance record
In summary, whilst a pension will provide part of the funds needed for your retirement, you are likely to need additional funds in the form of other assets, such as a workplace pension, a personal pension, and/or investments in order to achieve the lifestyle that you have planned for in retirement.
What Will Affect How Much You Need?
When thinking about retirement planning, it’s crucial to remember that every individual has different needs and circumstances. Even individuals of the same age with roughly equivalent pension pots will often require completely different strategies for their retirement.
Your planned retirement age
Retirement age: The number of years your savings will need to last to support your planned retirement can differ by several years. So someone retiring at 60 would need to ensure their private pension can last until State Pension age, 66 or 67.
There are certain factors which affect how much you need in retirement. How old you are when you retire is one, your planned retirement age. Another is the expected lifestyle in retirement of you and/or your partner(s), and whether you are planning alone or as a couple, your planned family status.
Your expected lifestyle
A reliable retirement budget is based on how you will spend your money in retirement and therefore will reflect your planned activities and expenditures in retirement.
Remember that your spending in retirement may vary from year to year. Therefore it is important that your plan allows for some flexibility. As an example, you may expect to spend more on holidays, hobbies, etc. in some years, while in others you may have more money available to spend on other things.
Whether you are planning alone or as a couple
Couples can share some household expenses (like for example for energy, for broadband, for housing) but they will have two State Pensions between them and potentially also two workplace pensions or two personal pensions etc.
In planning for retirement as a couple, however, account needs to be taken of what happens on the death of one of the partners. Some part of their pension income may reduce or even cease, but the couple’s household costs are likely to continue as before.
Your mortgage or rent
Housing costs are expected to be one of the greatest expenses of retirement. The required income in retirement in order to cover a mortgage on a home that is not paid off in full will be greater than the income required by the Retirement Living Standards.
Tax in retirement
Income from workplace pensions, from personal pensions, and from a pension drawdown may be taxed as well as the State Pension, paid as gross. The amount of gross income required to produce a given net amount after tax will depend upon the individual’s tax situation.
For Scottish taxpayers income is taxed using different rates and bands than the rest of the United Kingdom, so their required gross income using the above examples would differ from the figures shown for the remaining home countries.
Retirement planning does not have to be about the total value of your pension savings. Planning for the gross income that will be required in retirement, and then looking at how that can be drawn down across different tax years, can be just as important.
Inflation
A long retirement of 20-30 years could mean significant price rises during your retirement. A comfortable income at the start of your retirement may not go as far later on.
Consider how your different sources of income will increase with inflation, and assess whether your investments will continue to meet your objectives.
The legacy you want to leave
A couple may intend to use most of their wealth during their retirement, whilst others may want to leave some money, property or investments to their family.
An Estate planning team can review pension decisions in the context of a wider retirement plan and estate, identifying whether your assets will be distributed in line with your wishes and – where desired – used to leave a legacy to loved ones.
How Can I Check Whether My Pension Is on Track?
Even before knowing your final retirement date, you can start to check whether your pension is on track. We provide a 4-step overview to get you started.
1. Find all your pensions
Make a list of all of your current pension schemes. As mentioned previously, if you have changed employers numerous times throughout your career then you could potentially have a pension scheme for each of them.
2. Check your State Pension forecast
Check the State Pension age and forecast amount, plus expected payment amount, for you. Note that even if you expect to get a full rate amount you may not get it in full, i.e. there may be a reduction.
3. List your other assets and income
Income in retirement may also come from other savings and investments, such as ISAs, personal pensions, off-shore investments, cash, property and also part-time work or retirement activities.
Your pension should be considered as part of your overall financial position. Savings and investment advisers can help you to assess your current savings and investments, as well as your pension, to help plan for your retirement.
4. Estimate your retirement spending
List your spending in retirement. The essential costs are separate from the discretionary costs, such as your spending on holidays and the money you spend on maintaining your car.
It is worth setting out your estimated future retirement spending in detail, and producing several versions of your spending budget, including minimum, preferred and comfortable levels of expenditure.
5. Compare your expected income with your spending
Estimate the income that your current pensions and other assets could bring in retirement, and compare this against your retirement spending goals.
A pension calculator provides an instant indication of the possible income a person’s current pensions and other assets could provide in retirement. Remember, however, that the results are an estimate and are not a personal recommendation.
6. Test different scenarios
How would your planning look if you were to retire earlier, contributed more, had lower investment returns or faced unexpected costs to your savings?
You must test different scenarios and take note of potential risks to your plans.
Can I Catch Up If Your Pension Is Behind?
There is still time to put your retirement back on track.
Depending on your circumstances, possible steps may include:
- Increasing regular pension contributions
- Making additional lump-sum contributions
- Ensure that you are receiving the maximum employer contribution available for your pension.
- Reviewing charges and investment performance
- Adjusting your planned retirement date
- Using savings and investments alongside your pension
- Reviewing the level of income you expect to need
For the 2026/27 tax year, the annual allowance for pension contributions will be set at £60,000. However, as with other allowances, the personal allowance for tax relief on pension contributions will be reduced by the amount of any other income, including income from pensions that have already been released from a defined contribution scheme as part of flexible retirement. In addition, tax relief on pension contributions will also be restricted by reference to an individual’s earnings.
Combining older pensions may make them easier to manage, but transferring them is not always the best course of action. For example, an existing pension may contain guarantees, valuable benefits or even favorable terms that would be lost in the transfer process. It is therefore essential to check the terms and conditions of any current pensions before any decisions are made.
When Should I Start Planning for Retirement?
Reviewing your pension in good time means you can adjust your pension contributions and check on the investment performance of your pension, before you feel under pressure to make decisions concerning your retirement.
Having a long time before retirement to put your pension on track, to review your investments and to take advantage of any additional contributions to which you may be eligible, through your employer, in respect of which relief against tax may also be available, will help to spread the burden of planning and reduce the pressure to take action in the few years leading up to your retirement.
Planning for retirement is important at any age, and planning for retirement can still have a positive impact on your retirement planning, even if you are nearing retirement. For example, decisions around tax, pension withdrawals, investment risk and income sustainability can have a lasting impact on your financial situation in retirement.