How would a pension influence your retirement income?

A pension is more than a pot of money. It is the income you will lean on when you slow down from work or stop working altogether. That future can feel distant, yet the decisions you make now determine how much freedom you have later. The useful way to approach it is to start with what life in retirement actually costs, set a baseline from the state pension, then decide how your workplace pension fills the gap. The Retirement Living Standards give you a practical starting point, and the current state pension and auto enrolment rules show how your contributions translate into future income.

The Pensions and Lifetime Savings Association updates the Retirement Living Standards to reflect how real households spend. In the June 2025 update, a one-person household needs £13,400 a year to reach the Minimum standard, £31,700 for the Moderate standard, and £43,900 for the Comfortable standard. For two people sharing costs, the figures are £21,600, £43,900 and £60,600. These amounts moved in different directions this year because energy costs fell for Minimum while general prices still lifted Moderate and Comfortable modestly. The language also shifted to “one-person” and “two-person” to better reflect living arrangements in later life.

These are not targets to hit at all costs. They are planning anchors that let you map your expected expenses against a realistic lifestyle. Importantly, the PLSA notes that two people who both receive the full new State Pension can cover the Minimum standard without drawing on private savings, which is a reminder that your private pension is there to lift you from the essentials toward more choice and flexibility.

From April 2025 the full new State Pension is £230.25 per week, which is about £11,975 a year. To receive the full rate you usually need 35 qualifying years on your National Insurance record if you did not have NI history before April 2016. You need at least 10 qualifying years to receive anything at all. If you have between 10 and 35 years, your weekly amount is broadly proportional, adding about 1/35 of the full rate for each qualifying year. That means 10 qualifying years produce roughly £65.79 per week at today’s rate.

Your actual entitlement can differ if you were “contracted out” before 2016 or if you have a protected payment above the full rate due to accruals under the old system. The simplest next step is to check your State Pension forecast and your NI record so you can see whether buying back missing NI years makes sense. The forecast service shows where you stand and which years count, so you can decide on voluntary contributions with eyes open.

Auto enrolment means most employees are put into a workplace pension and receive an employer contribution. By law, the minimum total contribution is 8 percent of “qualifying earnings,” with at least 3 percent paid by your employer and the rest coming from you and tax relief. For 2025/26, qualifying earnings run between £6,240 and £50,270, and workers aged 22 to State Pension age who earn at least £10,000 a year are generally enrolled automatically. If you are younger or earn less, you can usually opt in and still receive an employer top-up.

Those thresholds matter because contributions calculated only on qualifying earnings exclude the first £6,240 of pay and anything above £50,270, which can underfund higher earners unless they or their employers set a scheme that uses full salary or pay extra. If your employer offers salary sacrifice or contributes above the minimum, your savings rate improves without you shouldering the entire increase. The lesson is that contribution basis and scheme rules are as important as headline percentages.

Pension saving compounds because the money is invested for many years and because many employers match at least part of what you pay in. Independent illustrations from WEALTH at Work show how a one percentage point increase in employee contributions, when matched by the employer, can lift the projected retirement pot by roughly 25 percent for typical basic-rate earners. That result is sensitive to your age, salary growth, investment returns, and whether a match applies, but it demonstrates the long-run power of a small change made early.

Start with the lifestyle you want. Suppose you aim for the Moderate standard as one person, which the 2025 update places at £31,700 a year. The full new State Pension contributes £11,975, so you would need about £19,725 a year from workplace and private savings to close the gap. You can generate that income in different ways, from drawdown to annuities. The PLSA offers indicative ranges for annuity purchase at current rates. For a one-person Moderate lifestyle, it suggests that someone receiving the full state pension might need a private fund in the region of £330,000 to £490,000 if converting to an annuity, while Comfortable could require about £540,000 to £800,000. These are not prescriptions, but they help you sense-check your trajectory against actual costs.

If you plan to share costs in retirement, the arithmetic changes. The Minimum standard for two people is £21,600, and two full state pensions together are about £23,950 a year at current rates, which means the essentials are covered before drawing on private savings. For the Moderate or Comfortable standards, the PLSA’s 2025 illustration shows that each person might need a pot of roughly £165,000 to £250,000 for Moderate or £300,000 to £460,000 for Comfortable if buying an annuity, assuming both receive the full state pension and have no rent or mortgage. Your own housing, tax situation, and health will shift the numbers, which is why the Standards are guides, not rules.

Your first step is to get official numbers. Use the State Pension forecast to confirm your estimated weekly amount and identify gaps in your NI record. If there are missing years, consider whether voluntary contributions make sense for you after checking eligibility for NI credits. Many people are surprised at how a handful of added years can lift their guaranteed income for life.

Your second step is to review your workplace pension. Confirm your contribution rate, your employer’s rate, and the basis used to calculate contributions. If your scheme uses qualifying earnings, ask whether you can switch to a whole-salary basis or increase your rate so more of your pay attracts contributions. If your employer offers salary sacrifice, understand how it changes your take-home pay and whether it frees up headroom to raise your rate while keeping monthly costs manageable. The legal minimum will not always reach a Moderate lifestyle on its own, especially if you started late, so personal top-ups are often needed.

Your third step is to compare your current plan to the Retirement Living Standards that match your goals. Map your expected state pension and any defined benefit entitlements against those annual costs, then see how much ongoing private income you still need. If you prefer a drawdown route rather than an annuity, you can still use the Standards to set a sustainable withdrawal range and to plan for inflation and market shocks. The Standards are designed for this practical kind of planning and are updated to reflect actual spending patterns.

If you are aged 22 or above, earn at least £10,000 a year, and usually work in the UK, your employer should enrol you automatically. If you are younger or earn under the trigger, you still have the right to opt in and, if you cross certain thresholds, to receive an employer contribution. Opt-in rules matter for students, part-time workers, and those with multiple jobs, because even small contributions attract tax relief and potential employer money that compounds over time.

Consider a 35-year-old earning £32,000 in a scheme using qualifying earnings. At the 8 percent minimum, contributions apply only to income between £6,240 and £50,270, so the annual pensionable slice is £25,760 and the total minimum contribution is about £2,060 a year, with at least £773 from the employer. If this person increases their own rate by one percentage point and the employer matches, the total going in rises meaningfully while the hit to take-home pay stays modest due to tax relief. Over a long horizon, that extra one percent can shift outcomes dramatically.

Now take a two-person household, both at full state pension, targeting the Moderate standard. The combined state pension covers roughly £23,950 a year. The Moderate cost is £43,900, leaving about £19,950 to find from private sources. If each person holds a pot near the PLSA’s Moderate annuity range, the household can reach the target with a cushion for tax and contingencies. For households with mortgages into retirement or rent to pay, the target will be higher, so it is important to run numbers specific to your housing and tax band.

The state pension rate is set each April and currently follows the triple lock. Auto enrolment thresholds are reviewed annually. For 2025/26 the enrolment trigger remains £10,000 and the qualifying earnings band remains £6,240 to £50,270, which means the minimum contribution still excludes the first slice of pay and any amount above the upper band. That design helps employers manage costs but can leave higher earners under-saving unless they opt into higher rates or use a scheme that calculates contributions on full salary. Keeping an eye on these mechanics is part of being on track.

The Retirement Living Standards UK 2025 give a realistic picture of the annual income different lifestyles require. The state pension provides a solid base, but for many people it will not cover more than the Minimum standard on its own. Your workplace pension is designed to close the gap, and even small increases in your contribution rate can change the destination meaningfully over time. The practical approach is simple. Check your forecast and NI record. Confirm your contribution rates and the basis used in your scheme. Compare your projected income to the Standard you want. Then make one small change you can keep, because in pension planning consistency does the heavy lifting.

If you want to dig deeper into the underlying figures or explore the spending baskets behind each lifestyle level, the PLSA’s Retirement Living Standards pages explain what each standard includes, how they are calculated, and how often they are updated, with the 2025 methodology and examples published for public use.