Could your savings get you to early retirement?
- Jessica Still
- 13 hours ago
- 6 min read
Early retirement. It has a certain ring to it, doesn’t it? No alarm clock. No Sunday-night dread. More time to do the things you actually enjoy.
But before you mentally hand in your notice, there’s one important question worth asking:
How much do you really need to retire?
Saving for the future isn’t easy. When you’re juggling mortgages, rent, childcare, holidays, and the occasional ‘treat yourself’ moment, retirement can feel very far away. But if early retirement is the dream, understanding the numbers is a good place to start.
How much do people normally retire with?
Let’s start with a reality check.
According to the Office for National Statistics (ONS), the average pension pot for people aged 55–64 is £137,800. That’s often around the point people begin thinking seriously about retirement.
Here’s how pension savings tend to build over time:
16–24: £5,500
25–34: £18,800
35–44: £39,500
45–54: £80,000
55–64: £137,800
Many people end up with less than they expect. If you want to retire early, you’ll likely need more than the average.
If you’re in the public sector with a Defined Benefit pension, you won’t have a pot, you’ll have a guaranteed retirement income instead. You can use resources like the Retirement Living Standards to estimate what you’ll need.
Source: Pension wealth: wealth in Great Britain, 2020–2022, ONS, published January 2025. Only includes people with pension wealth; those with zero pension savings are excluded.
Can you rely on the State Pension?
The State Pension provides a helpful foundation, but it’s not designed to fund a comfortable lifestyle on its own.
If you qualify for the full new UK State Pension for the 2025/26 tax year, you will receive around £11,975 per year, which equates to £230.25 per week. That covers the basics, but not much more.
On top of that, the State Pension age is rising. Between April 2026 and April 2028, it will increase from 66 to 67. And then, between April 2044 and 2046, it will increase again to age 68. If you want the freedom to retire before then, building your own savings becomes even more important.
Note: This applies to the “new” State Pension system for people reaching State Pension age after 6 April 2016. Individuals on the “old” system may have different entitlements.
How much would you need in retirement?
How much you need depends on the lifestyle you want. According to the Retirement Living Standards (2025/26), for single-person households:
Minimum: £13,400 per year which covers basic needs
Moderate: £31,700 per year which covers a comfortable standard, including occasional extras
Comfortable: £43,900 per year which allows a higher standard, including holidays and leisure
For two-person households:
Minimum: £21,600 per year
Moderate: £43,900 per year
Comfortable: £60,600 per year
These figures cover typical living costs such as housing, food, utilities, transport and leisure. Your personal situation may vary.
What changes if you want to retire early?
Retiring early doesn’t just mean stopping work sooner. It means your savings have to last longer.
If you retire at 55, you could need to fund at least a decade (often more) before your State Pension starts. During that time, your income might come from:
Your workplace pension (which may be paid early, often at a reduced amount)
Tax-free lump sums, including from AVCs or Shared Cost AVCs
Private pension savings
ISAs or other savings
Additional investments
Important: A pension plan cannot typically be accessed until age 55 (rising to 57 from 2028), except in cases of ill health.
Why your savings need to work harder than you think
One thing that often gets overlooked in early retirement plans? The world doesn’t stand still once you stop working.
Over time, inflation means your money buys less. Everyday costs like food, energy or travel tend to rise, even if your income doesn’t. What feels affordable today might feel different in 10 years.
There’s lifestyle creep too. As your income increases, so does your ‘normal’. Nicer holidays. Bigger homes. Better cars. None of these are bad things, but they can quietly raise the level of income you’ll need in retirement too.
This matters even more if you retire early. Your savings don’t just need to cover more years; they need to keep pace with rising costs throughout those years.
Planning for early retirement isn’t about hitting one magic number. It’s about building flexibility into your savings, creating a financial buffer to ensure your lifestyle isn’t squeezed and keeping options open to adjust withdrawals or contributions over time.
Want to boost your chances of early retirement?
Early retirement usually comes down to one thing: saving more, when you can.
That doesn’t mean giving up all life’s pleasures or becoming obsessed with spreadsheets (because who wants that?). It’s about making the most of the options available to you and letting time do some of the heavy lifting.
Here are some of the practical ways to give your future savings a boost:
Increase contributions gradually
Good news: you don’t need to make big changes overnight.
Whether you’re in a Defined Contribution (DC) or Defined Benefit (DB) pension, putting in a little extra can make a real difference. Even increasing your contribution by 1–2% through your DC pension, or paying into an AVC alongside your DB scheme, can add up over time, especially if done regularly:
When you get a pay rise
When a big expense ends (like childcare or a loan)
When reviewing your finances annually
Small changes, repeated over time, can add up more than you expect.
You should consider your affordability before commencing or increasing contributions to a pension plan, or to other savings and investment products.
In the LGPS? SCAVCs are worth understanding
If you’re in the LGPS, you may have access to something called a Shared Cost Additional Voluntary Contribution (SCAVC) scheme. Ignore the long name, here’s what it really means:
A SCAVC is a way to pay extra into your retirement savings, on top of your main LGPS pension.
How it works:
You choose how much extra you’d like to save each month.
A small amount counts as a personal contribution and receives tax relief. The rest is paid in by your employer through salary sacrifice which means you save on tax and National Insurance.
Because the money is taken from your pay before tax, it’s a tax-efficient way to boost your savings.
In simple terms, you’re boosting your retirement savings and getting help from your employer and the government at the same time.
SCAVCs can be particularly useful if you’re thinking about retiring earlier because:
They help you build a bigger overall pot
You benefit from tax and national insurance savings straight away
A Shared Cost AVC scheme is a pension product for active LGPS members and can only be accessed from age 55 onwards, rising to 57 in 2028. The scheme is facilitated by My Money Matters, and the fund you choose to invest into will be managed by your SCAVC provider.
Whilst Shared Cost AVC schemes can offer valuable benefits, they may not be suitable for everyone, and you should consider if it’s right for you. You can speak to a financial adviser, or book a 121 with a Financial Education Coach, if you require guidance.
Use tax-efficient savings (they’re doing more than you think!)
Cash ISA: save up to £20,000 per year (reducing to £12,000 from 2027 for people under 65), tax-free. Useful for short- to medium-term savings or as a buffer for early retirement.
Stocks & Shares ISA: invest up to £20,000 per year, tax-free, with potential long-term growth.
Lifetime ISA (18–39): save up to £4,000 a year, with a 25% government bonus. Withdrawals for purposes other than retirement or a first home usually incur a 25% penalty.
It’s also worth knowing that the UK Government is reviewing how Lifetime ISAs work, with potential reforms being considered this year. Nothing has changed yet, but if you’re eligible, some people may choose to open a Lifetime ISA with a small amount (even £1), so they have the option available if the rules change later.
Tip: A common rule of thumb is to save half your age as a percentage of salary when you start. So 10% at 20, 15% at 30, etc.
The value of investments and income from them can go down. You may not get back the original amount invested. Capital at risk. Tax treatment depends on your individual circumstances. The value of your investments may go down as well as up and you could get back less than you put in. Your £20,000 ISA allowance is a single annual limit across all ISA types, not per account. If you’re unsure, speak to a financial adviser.
Don’t panic, just check in
If your savings are lower than average for your age, try not to stress. What matters most is whether they’re on track for the retirement you want, not how they compare to someone else’s.
Small actions like increasing contributions after a pay rise, reviewing where your pension is invested or getting a clearer picture of your options can have a big impact over time.
Early retirement isn’t about being perfect. It’s about giving yourself choices. And the steps you take today could make a very big difference to how (and when) you get to stop working.
This is not financial advice. A pension is a long-term investment. The fund value may fluctuate and can go down. Your eventual income may depend upon the size of the fund at retirement, future interest rates, and tax legislation. The value of investments and income from them can go down. You may not get back the original amount invested. Capital at risk. A pension plan cannot typically be accessed until age 55 (rising to 57 from 2028), except in cases of ill health. Tax treatment is based on individual circumstances and may be subject to change in the future.