With no default retirement age in the UK, many dream of retiring early. However, without the State Pension, which starts at 66 (rising to 67 by 2028 and 68 by 2046), early retirees must rely entirely on their private pension savings and other income sources.
The Pension and Lifetime Savings Association (PLSA) estimates that a moderate retirement—including one foreign holiday a year and dining out a few times per month—requires £31,300 per year. Experts suggest this would require a pension pot of £615,000 if withdrawing through an annuity.
How Can You Retire at 60 Without a State Pension?
Retiring at 60 means covering nearly a decade of expenses before State Pension eligibility. Private pensions, investments, and passive income sources (like buy-to-let properties) become crucial.
According to Quilter’s financial planning consultant Ian Futcher, early retirement is about more than just numbers—it’s about lifestyle goals:
- Many retirees want to travel more and enjoy an active lifestyle.
- Early retirement expenses tend to be higher, making front-loading pension savings essential.
How Much Should You Contribute to Your Pension?
Futcher suggests a reasonable target is to replace 50-60% of your working income in retirement. The earlier you start, the less you need to contribute each month.
| Starting Age | Monthly Contribution Needed (to reach £615,000 by 60) |
|---|---|
| 22 years old | £583 per month |
| 30 years old | £875 per month |
| 35 years old | £1,493 per month |
| 45 years old | £2,727 per month |
The calculations assume steady investment growth and no major financial disruptions.
What Are the Risks of Retiring Early?
While retiring early sounds appealing, financial experts highlight potential drawbacks:
1. Missing Out on Additional Pension Contributions
- Working beyond 60 allows continued tax-efficient pension contributions.
- You also benefit from longer investment growth periods.
2. Higher Risk of Running Out of Money
- Without a state pension cushion, your personal savings bear the entire burden.
- A drawdown strategy (rather than an annuity) requires careful withdrawal planning to avoid depletion.
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3. Increased Tax and Investment Risks
- Larger pension withdrawals could push you into a higher tax bracket.
- Poor market performance could impact investment-based pension pots.
How Can You Maximize Pension Savings for Early Retirement?
1. Start Early and Stay Consistent
- The earlier you begin regular pension contributions, the easier it is to build a substantial retirement pot.
- Employer contributions and tax relief boost savings significantly.
2. Maximize Tax Benefits
- Higher earners can take advantage of pension tax relief at 40-45%.
- Consider additional investments like ISAs to create tax-free income streams.
3. Plan for a Drawdown Strategy
- Instead of purchasing an annuity, many retirees stay invested through drawdown pensions.
- However, a drawdown requires careful withdrawal management to prevent funds from running out too soon.
FAQs
How much money do I need to retire at 60?
Experts suggest a pension pot of at least £600,000 for a moderate retirement lifestyle.
Can I retire at 60 if I don’t have £600,000?
It depends on other income sources like investments, property rentals, and part-time work.
What happens if I run out of pension savings before the state pension starts?
Without careful planning, early retirees risk depleting their funds before State Pension eligibility.
Is it better to buy an annuity or use pension drawdown?
An annuity provides guaranteed lifetime income, while drawdown keeps money invested with flexible withdrawals.
How can I reduce my retirement tax burden?
Using ISAs, employer pension contributions, and tax relief strategies can help minimize tax liabilities.
What is the biggest risk of retiring at 60?
Running out of money due to longer retirement years, market volatility, and unexpected expenses.
Can I still contribute to my pension after retiring?
Yes, you can continue contributions even if you are not working, benefiting from tax relief.
Should I downsize my home to boost my retirement funds?
Many retirees sell large properties to free up cash for living expenses or investing in income-generating assets.
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Aanchal is a passionate writer with a keen interest in storytelling, content creation, and creative expression. She enjoys exploring diverse topics and crafting engaging narratives that captivate readers.
