Interactive Investor

£1m needed for comfortable retirement in 40 years

Inflation raises the burden, new research from interactive investor shows.

19th February 2024 13:51

Alice Guy from interactive investor

New research, from interactive investor based on the PLSA Retirement Living Standards reveals the size of pension pot younger pension savers could need in 40 years and how much they could need to save to get there:

  • Those in their 20s could need around £1.1 million to achieve a comfortable retirement in 40 years’ time, assuming 2% inflation
  • In 40 years, those aiming for a moderate retirement could need £662K while those aiming for a minimum standard of living in retirement could need a pot of around £88K
  • Someone on a median full-time salary would need to contribute around 12% to achieve enough for a moderate retirement and could achieve a pot size of around £691K in 40 years, assuming 5% investment growth and 2% annual salary/contribution growth
  • Meanwhile, someone earning £30K and contributing 8% to their pension, (the current minimum level of contribution in retirement) could achieve a pot size of around £460K in 40 years, leaving them with a pension shortfall of £600K to achieving a comfortable retirement

The PLSA Retirement Living Standards give suggested pension pot sizes for different levels of living standards in retirement, but they don’t take future inflation or housing costs into account. This means younger workers could need a lot more by the time they reach retirement age.

Pension pot needed in 40 years

Minimum retirement

Moderate retirement

Comfortable retirement


In 2024

In 40 years

In 2024

In 40 years

In 2024

In 40 years

Pension pot needed







Assumptions – 2% inflation, data for pot size needed from PLSA Retirement Living Standards – based on lowest value within PLSA range (£8,000 per £100,000 annuity rate).

Pension pot achieved with different levels of pension saving

Pension contributions of 8%

Pension contributions of 10%

Pension contributions of 12%

Pension gap (comparing to moderate retirement)

£30,000 salary (median salary including part-time workers)





£35,000 salary  (median full-time salary)





£35,000 salary with 2-year career break





Assumptions: 5% investment growth net of fees, 2% growth in salary/contributions and inflation. Lowest value used for PLSA retirement living standards.

Alice Guy, Head of Pensions and Savings, interactive investor says: “Our calculations shine a light on the punishing impact of inflation over time as the amount needed for a comfortable retirement is expected to double over the next 40 years. Inflation makes it much harder to achieve your retirement goals, eroding the value of your savings and income in real terms over time. The figures assume wage inflation of 2% each year, but not everyone will be fortunate enough to get an inflationary pay rise every year.

“With increasing living costs and a rising state pension age, building private pension wealth has never been more important. And saving into a pension is one of the best ways to build long-term wealth because investments tend to outstrip inflation over time. If you’re planning to retire before the state pension age, you may also need to save more because you’ll have a gap to bridge before the state pension kicks in.

“Worryingly, these figures don’t take housing costs into account, so those renting could need even more. We know that many more people are now renting in their 40s and 50s and many are likely to continue renting into old age, making retirement a lot more expensive.

“It’s vital to keep an eye on your pension pot size, and what that could mean for you in retirement. Consider increasing your pension contributions slightly if you have a pay rise, because minimum contribution levels are often not enough for a comfortable retirement. Even small increases in contributions could have a dramatic impact on your long-term pension wealth, potentially giving you more financial freedom in retirement.”

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