How to save for retirement

Whether it’s still years away, or just around the corner, saving for your retirement is just one way to invest in your future.

Key takeaways:

  • it’s never too early to start investing in your future
  • pensions are important but not the only way to save
  • diversifying your savings/investment portfolio can really help to make sure you aren’t relying on just one income stream when you retire.

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How much to save for retirement?

What are my savings options for retirement?

Pensions

Savings accounts & ISAs

Saving for retirement FAQs

How much to save for retirement?

What your retirement looks like is in your hands. So how much you choose to save depends on your lifestyle and goals.

Plan ahead

It can pay to think about your wants and needs, plus how much money you’ll need to keep enjoying your current lifestyle.

It’s likely that your spending will change as you get closer to retirement. With many people spending less on a mortgage, but more on things like heating bills and healthcare. 

Review your spending

Start by looking at your annual income and expenses to get a rough idea of what you’d need to live on each month – or where you might need to cut back to live on less. This can give you a clearer picture of how much you’d need to save.

Think about how you’ll pay for your everyday expenses, along with any luxuries and holidays you’d like to enjoy.

Consider any pension plans you have and what income they’ll provide. You can check your state pension forecast on the gov.uk website.

What are my saving options for retirement?

Whether you plan on travelling the world or spending more time with your family, there are a few options you have when it comes to the best ways to save for retirement.

 

Saving into a pension plan is the most common way people save but spreading your portfolio can help. This means you’ll have a few different income streams to rely on when you retire.

 

This can vary from person to person but it’s a good idea to consider pensions, savings accounts and investments as a starting point. 

Pensions

Most people have both a state pension and a workplace pension. While it’s worth checking the terms of yours, the general setup is that you contribute a certain percentage of your salary, your employer adds to it, and the government boosts it further with tax relief.

State and workplace pensions

Many people will receive a state pension when they reach retirement age, but you might need some extra funds to cover luxuries and holidays once you’ve stopped working.

Being a member of your workplace pension will help toward funding these extras and you'll benefit from what your employer pays in. Your employer may also match any extra contributions you pay.

Personal pensions

To boost your retirement pot further, you could also pay into a personal pension, such as a self-invested personal pension (SIPP). This is a type of personal pension that can give you greater control over where you invest your money.

If you already have a pension plan, it’s a good idea to make sure it’s fit for your circumstances. You usually have the option to change your monthly payments or make a one-off contribution.

Boosting your retirement savings

Combining your retirement pot with a savings product, such as an Individual Savings Account (ISA) or a Fixed Rate Savings Account, could help you have a healthy amount saved for retirement. Eligibility criteria and T&Cs apply.

Bear in mind, you can only access your state pension once you reach state pension age. You can check this at gov.uk, as well as information around accessing personal and workplace pensions.

Savings accounts & ISAs

There are a range of ISAs and savings accounts that can help you to save for your retirement, alongside your pension.

 

ISAs can be a good option for tax-free saving*. But, be sure to stay within ISA subscription limits outlined by the government for each tax year.

 

To get more favourable interest rates, it can pay to save into a fixed rate savings account or one that offers a bonus. These accounts often require you to lock in your money for a set period or meet certain criteria to qualify.

 

Products to explore include:

  • fixed rate savings accounts - with a fixed rate savings account you can work out what returns you'll get over a set period of time, but you'll need to lock your money away. For more information take a look at our fixed rate savings guide
  • cash ISA - tax-free savings with easy-access to your money
  • lifetime ISA - specifically designed for retirement savings, with a government bonus on contributions.

* free from UK income and Capital Gains Tax.

Investments

Investing can also be a good way to boost your savings while staying within a level of risk you feel comfortable with. Bear in mind – the value of investments can go down as well as up, and you could get back less than you invest. A stocks and shares ISA can be a good option for long term savings. Take a look at our savings and investment products to see if there are any that could work for you. Eligibility criteria and T&Cs apply.

Saving for retirement FAQs

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