A quick note before we begin

This episode was recorded in March 2026, when Six Figure Safety was my main programme. I’ve removed the expired enrolment promotion and updated the figures that have changed since the recording, including the Retirement Living Standards and the full new State Pension rate.

I’ve also tightened the investment example. The original recording used hypothetical growth rates of 8% before retirement and 7% afterwards, which made a £25,000 annual withdrawal look extremely comfortable. Returns are not guaranteed, fees and inflation matter, and somebody retiring before State Pension age needs to fund the gap before that income begins. The written version keeps the five-step method without presenting one optimistic projection as a safe personal plan.

Important financial-information note

This article is general financial education, not regulated financial or pension advice. Pension transfers, consolidation, contribution methods, investment choices, tax and retirement withdrawals depend on your circumstances. Defined-benefit pensions and other safeguarded benefits need particular care before any transfer is considered.

Use the process to organise the questions and understand the gap. For personal recommendations, speak to an appropriately authorised financial adviser. You can also use MoneyHelper’s free, impartial pension guidance and calculator.

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In this episode

You know you probably have three old workplace pensions somewhere, one from a job you left twelve years ago, one attached to an email address you cannot access and one you vaguely remember opting out of because you were 23 and wanted the extra money now.

Then you became self-employed, employer contributions disappeared and retirement planning joined the list of things you would deal with when the business made more money.

Low-level stress. Gorgeous.

In this episode, we’re talking about:

  • why self-employed retirement planning feels harder;
  • the five steps for calculating your retirement number;
  • how to cost the life you actually want;
  • how to find old workplace pensions;
  • the difference between defined-benefit and defined-contribution pensions;
  • which retirement income streams belong in the plan;
  • how inflation, fees, growth and retirement timing affect the calculation;
  • and how to turn the final gap into a monthly contribution target.

The old retirement model does not fit everybody now

Previous generations were more likely to spend decades with one employer, build one substantial workplace pension and combine it with the State Pension.

Many of us have changed jobs repeatedly, collected several small pots, opted out of at least one scheme and then left employment to work for ourselves.

The pensions did not disappear. The thread connecting them did.

That is why “How much do I need to retire?” can feel impossible. You are trying to calculate a future income without a clear picture of the lifestyle, the pots already built, the age each income begins or what the business needs to contribute now.

The answer is not one magic percentage of your current salary. It is a five-part calculation.

First, understand what changed when you became self-employed

Eligible employees are automatically enrolled into a workplace pension under UK rules, and the employer contributes alongside them. Current age and earnings criteria can change, so check The Pensions Regulator’s current automatic-enrolment guidance rather than relying on an old threshold quoted in a podcast.

The employer contribution matters because it is money you do not receive when you leave employment and make no replacement plan.

I opted out of a workplace pension in my early twenties because I did not understand the long-term value. Very useful financial educator origin story. Zero notes.

Once self-employed, you generally need to arrange retirement saving yourself. The tax and contribution route can differ between a sole trader and a limited-company director, particularly where a company makes employer contributions. Do not copy somebody else’s setup from Instagram. Ask an accountant or regulated adviser which route applies to your legal structure and goals.

The five-step retirement-number method

The process is:

  1. Define the retirement life you want.
  2. Calculate what that life may cost.
  3. Find what you already have and estimate its future value.
  4. Map every income stream and the age it begins.
  5. Calculate the shortfall and the contribution required to address it.

By the end, you should have more than a large frightening number. You should know where the number came from, which assumptions affect it and which action is available now.

Plans change. A calculation you understand can change with them.

Step one: decide what retirement means to you

People ask how much they should put into a pension before deciding what the pension is meant to fund.

I do not know, girl. What are we paying for?

One person wants to stop working at 50, take four cruises a year and treat any State Pension as bonus money. Another does not want to retire completely, imagines herself as a tiny granny with a side hustle and wants enough security to choose which work remains.

Both are retirement plans. They do not have the same cost.

Think about:

  • the age at which you want paid work to become optional;
  • whether you want to stop entirely or reduce your hours;
  • where you want to live;
  • whether the mortgage or rent will still exist;
  • travel, hobbies and family support;
  • expected healthcare or care needs;
  • whether you want to leave an inheritance;
  • and how long the plan may need to fund.

Family health history may influence the care costs or safety margin you want to include. None of this predicts exactly what will happen. It stops the retirement number being detached from the life.

Borrow clues from other people’s retirements

If picturing yourself decades from now feels abstract, look at people around you.

What do you admire about their retirement? What seems restrictive? Who continued working because they loved it, and who continued because the money required it? What expenses surprised them? What would they have done differently?

Write down the patterns rather than copying one person’s number.

The exercise is not woo. It gives the calculation inputs.

Hope is not a retirement strategy, and neither is a vision with no cost attached.

Step two: calculate the annual income required

The Pensions UK Retirement Living Standards provide a useful starting point for imagining retirement spending. As of the current published figures, a one-person household is estimated to need annual spending after tax of:

  • £13,900 for the minimum standard;
  • £32,700 for the moderate standard;
  • £45,400 for the comfortable standard.

For a two-person household, the current figures are £22,500, £45,400 and £62,700 respectively.

These are illustrative standards based on baskets of goods and services, not personal recommendations or guarantees. Pensions UK explicitly presents them as information to help people picture retirement, and the figures update as costs and public expectations change.

Use them as a prompt, then build your own annual budget.

Check the assumptions hiding inside the standard

The retirement lifestyle figures generally assume you do not have rent or mortgage costs to cover.

That may not match your plan.

Longer mortgage terms, later home ownership and high housing costs mean plenty of people will reach their preferred retirement age with housing payments remaining. My own mortgage term ran well into my sixties, which made “the house will obviously be paid off” a very unhelpful default.

So add or adjust:

  • mortgage or rent;
  • property maintenance and service charges;
  • location-specific living costs;
  • care or health-related costs;
  • tax on retirement income;
  • and any spending that matters to your version of the life.

If your current target is £39,000 a year in today’s spending power, record that as the lifestyle target. We will deal with inflation consistently when modelling it.

Use today’s money or future money, not a chaotic mixture

Inflation is one of the easiest ways to accidentally make a retirement calculation look more precise than it is.

You can model everything in nominal future pounds, increasing the spending target with inflation and using nominal investment returns. Or you can model in today’s money, using an investment return after inflation.

Either approach can work. Mixing today’s £39,000 lifestyle cost with an 8% nominal return and no inflation adjustment makes the future look considerably more generous than it may be.

For a simple first plan, today’s-money calculations are often easier to understand. Use a cautious real return after inflation and fees, then test several scenarios rather than relying on one number.

This is where an impartial calculator or regulated adviser becomes much more useful than a heroic spreadsheet assumption.

Step three: find every pension you already have

Before calculating the shortfall, find the money already working towards it.

Make a list of every employer, the approximate dates you worked there and any pension provider you remember. Include previous names and addresses that may appear on old records.

Then contact the employer or scheme administrator. If the employer changed ownership, find the parent company or current organisation. Human resources or payroll may be able to identify the scheme used during your employment.

Yes, this may involve a phone call. Thoughts and prayers to the millennials.

The government’s Find pension contact details service can provide contact details for a workplace or personal scheme when you know the employer or provider name. It does not confirm whether a pension exists or tell you its value. You still have to contact the scheme.

Even if you think you opted out, check. Certainty is useful.

Do not consolidate before understanding what you have

Several commercial services can help locate and consolidate pension pots. The original episode mentioned PensionBee because I had used it personally, not because the mention was sponsored.

Consolidation can reduce admin, but moving a pension means choosing the new provider, product, charges, investments and terms. It may also mean giving up valuable benefits.

Identify the pension type first.

Defined-benefit pension

A defined-benefit scheme promises retirement income based on the scheme rules, often using salary and length of service. Public-sector and older workplace schemes are common examples.

The relevant number is not simply a portable pot value. Transferring safeguarded benefits can have serious and irreversible consequences, and regulated advice may be required.

Defined-contribution pension

A defined-contribution pension holds contributions and investment growth in a pot. The eventual outcome depends on contributions, performance, fees and how benefits are taken.

These pots may be capable of consolidation, but “can move” does not mean “should move.” Compare costs, investment options, guarantees, protections and any exit terms.

Admin convenience is a benefit. It is not the only one.

Estimate what the current pots may become

Once every pension is located, record:

  • current value;
  • contribution amount;
  • employer contribution, if any;
  • charges;
  • investment fund;
  • retirement-age assumptions;
  • guarantees or protected benefits;
  • and the latest projected income or value provided by the scheme.

Do not add a defined-benefit annual-income promise to a defined-contribution pot as if they are the same unit. Keep future annual income and future pot values separate until the retirement-income plan brings them together.

For defined-contribution pots, use a calculator to test low, middle and higher growth assumptions after fees. Investment values can fall as well as rise, and past performance does not promise the next thirty years.

Step four: map every retirement income stream

Your personal pension does not necessarily have to fund the entire retirement alone.

Possible income may include:

  • defined-benefit pension income;
  • withdrawals or annuity income from defined-contribution pensions;
  • the UK State Pension;
  • ISAs or other investments;
  • rental income;
  • ongoing business income;
  • part-time work;
  • or another reliable source specific to your circumstances.

Keep uncertain income separate. A property you might buy one day and a business you hope will run without you are not the same as a pension already documented.

The plan can include them. The safety of the plan should reflect how much evidence exists.

Check your State Pension forecast, do not guess it

The full new State Pension is currently £241.30 a week, but the amount you receive depends on your National Insurance record and other factors. If your record began after April 2016, 35 qualifying years are generally needed for the full rate; people with earlier records or periods of contracting out can be treated differently. You need at least 10 qualifying years to receive any new State Pension.

Use the government’s State Pension forecast for your personal estimate rather than inserting the full rate automatically.

At the current full rate, £241.30 a week is around £12,548 a year before tax. The rate changes, and your future entitlement may be different.

Most importantly, State Pension begins at State Pension age, not the day you decide to retire.

Early retirement creates a bridge period

If you want to stop work at 60 but cannot claim State Pension until later, divide the plan into phases.

Using a £39,000 annual lifestyle target in today’s money:

Before State Pension age

Other pensions, investments, savings or earnings need to cover the full £39,000 each year.

From State Pension age

If your personal forecast eventually pays the equivalent of £12,548 in today’s terms, the remaining requirement from other sources becomes roughly £26,452 a year.

This two-stage model is more accurate than subtracting the State Pension from every year of a retirement that begins earlier.

The age matters as much as the annual number.

Ongoing business income can belong in the plan

Retirement does not have to mean closing the company and never earning again.

You may reduce your involvement, retain ownership, appoint operational support, license intellectual property or continue work you genuinely enjoy.

But build this income carefully into the forecast. A business that currently depends on your personal delivery is not passive retirement income because you would prefer it to become that later.

What must change for the revenue to continue without the current workload? Who delivers? What margin remains after that support? How reliable is demand? Can the business be sold, and is there evidence of value beyond you?

The retirement plan may reveal a business-design project that needs to begin years before retirement.

Step five: calculate the shortfall

You now have:

  • the annual lifestyle target;
  • the planned retirement age;
  • the period before State Pension begins;
  • existing pensions and their projected benefits;
  • other evidenced income streams;
  • and the length of retirement you are modelling.

The shortfall is what the current assets and income streams do not cover.

This is not one simple multiplication of annual spending by years. Investment returns, inflation, fees, tax, contribution growth, withdrawal timing and market sequence all affect the outcome.

Use a robust retirement calculator for the first estimate. MoneyHelper’s pension calculator can include State Pension plus defined-benefit and defined-contribution pensions, and lets you test retirement age and higher contributions.

Then use regulated advice where you need a personal withdrawal, transfer or investment recommendation.

What the original worked example showed

The recording used a deliberately simple example:

  • age 30;
  • retirement at 60;
  • planning to age 90;
  • £10,000 already invested;
  • £200 monthly contributions;
  • 8% annual growth before retirement;
  • 7% annual growth during retirement;
  • and £25,000 annual withdrawals from the pot.

The calculator produced roughly £407,500 at age 60 and showed the pot continuing to grow while withdrawals were made.

The maths demonstrates compound growth. It does not prove that £407,500 safely funds £25,000 a year for thirty years.

The implied initial withdrawal is more than 6% of the pot. The result depends heavily on the assumed 7% return arriving consistently, ignores the damaging effect of poor returns early in retirement and does not fully account for fees, tax or inflation. Real markets do not produce the same return in a neat row every year, which is quite rude of them.

Keep the lesson. Do not copy the assumption.

Model scenarios, not one comforting answer

For the accumulation stage, test:

  • lower, central and higher real returns;
  • different fee levels;
  • contributions increasing over time;
  • earlier or later retirement;
  • and periods when contributions pause.

For retirement, test:

  • spending before and after State Pension age;
  • lower returns;
  • higher inflation;
  • care or housing costs;
  • a longer life;
  • variable rather than fixed withdrawals;
  • and leaving a legacy versus spending the capital.

If the plan only works under the most generous return and the shortest lifespan, it is not giving you much room.

A range is more honest than a single enormous number presented to the nearest pound.

The monthly contribution is the output, not the starting point

Once the gap and assumptions are inside the calculator, adjust the regular contribution until the projected outcome supports the target with a safety margin you understand.

That monthly contribution can then enter the rest of your financial system.

Can your current owner’s pay fund it? Does the business need to generate more profit? Would a company contribution be appropriate? Which existing spending or goals compete with it? Does the contribution rise when debt ends or revenue grows?

This is where retirement planning reconnects to the business.

The pension target is not an isolated personal-finance task. It becomes one of the jobs your take-home pay or company profit needs to fund.

If the number looks impossible, change the inputs deliberately

A large shortfall does not mean the plan has failed. It shows which levers exist.

You may:

  • increase monthly contributions;
  • contribute lump sums when the business creates overflow;
  • retire later;
  • reduce the lifestyle target;
  • keep some paid work;
  • build another income stream;
  • change the housing plan;
  • or decide that leaving less inheritance is acceptable.

Each choice has a life consequence. That is why step one came before the calculator.

The goal is not to chase the largest possible pension pot. It is to fund the retirement you want without sacrificing every useful pound in the present.

Review the plan instead of setting it once at 31

Update the calculation when:

  • income changes materially;
  • the business structure changes;
  • you move house or refinance;
  • family or health needs change;
  • pension rules change;
  • retirement age changes;
  • or the investment and contribution history diverges from the model.

At minimum, review the pension values, contributions, charges, State Pension forecast and lifestyle target regularly.

Because you know how the number was built, changing it does not mean starting again. You update the assumption and see what moves downstream.

Your retirement number in five lines

  1. Decide when work becomes optional and what life costs then.
  2. Find every pension and understand what type it is.
  3. Estimate the income or pot each existing asset may provide.
  4. Add other reliable income at the age it actually begins.
  5. Model the remaining gap, including inflation, fees, tax and different return scenarios, then calculate the monthly contribution.

The useful result is not only the final pot.

It is knowing what today’s business needs to pay you so that present income can fund future choice as well.

Resources mentioned

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Emilie Nutley holding a calculator on the retro-style cover of the Not Just Revenue podcast.