Pension & retirement
Rick Hollington
Early retirement is something which may sound extremely attractive as you enjoy the Christmas holidays and make the most of time off from work.
But just how feasible is retiring early, how much money do you need and how can you best approach it?
Here we take a look at early retirement, examine the practicalities of giving up work and the options available to people looking to wind down and enjoy life without the 7am alarm call.
As people live longer and traditional final salary pensions become increasingly rare, achieving early retirement depends on building a strong financial foundation.
That involves boosting savings, investing with a long-term perspective, and planning for healthcare, inflation, and potential market fluctuations.
With a well-thought-out plan and regular reviews to stay on track, early retirement can shift from a distant dream to a reachable goal.
Before working out how much money you might need, it helps to define what a comfortable retirement looks like for you.
Some people imagine travelling or pursuing hobbies, while others just want enough stability to keep their current lifestyle. The income needed for these goals varies a lot from person to person.
In the UK, the full new State Pension offers a basic income to those with sufficient qualifying National Insurance contributions.
However, for most people, this is only a part of their retirement income. Clarifying your retirement goals helps determine how much extra savings you need to build up before leaving work.
As well as what you want to do in retirement, the amount of money you need will depend on a number of factors.
This includes your planned expenditure, any debts you have such as a mortgage, whether you have a partner, how much they earn and whether you plan to leave money after your death.
All this is not easy to figure out. However, Pensions UK has developed a tool called the Retirement Living Standards. This shows the cost of living at retirement across three different living standards: minimum, moderate and comfortable.
Breaking down spending in categories including house, food, transport and holidays, the tool comes up with figures for costs for a single person in retirement and for a couple in retirement.
The figures are updated every year to take into account the general rate of inflation and price rises in those key categories.
As of December 2025, it estimates the following annual cost of retirement living as follows:
| Minimum | Moderate | Comfortable | |
| One person | £13,400 | £31,700 | £43,900 |
| Two people | £21,600 | £43,900 | £60,600 |
While this is useful as a general guide, it will not take into account your particular circumstances such as any debts you have or the size of your pension pot.
A financial adviser can help you understand how much money you may need in retirement by producing a more personalised forecast.
They can also use cashflow modelling to show you different approaches to saving towards retirement could affect how much money you end up with.
Cashflow modelling can also show different scenarios to account for factors like inflation levels and varying investment returns.
Time is one of the most influential factors in building a pension pot which could allow you to retire early.
The sooner you start making contributions, the longer savings can benefit from compound growth.
Even small, regular contributions in your 20s or 30s can grow substantially over time, offering greater flexibility in later life.
Life commitments such as mortgages, childcare costs, or education fees often delay pension contributions.
However, reviewing your finances as your income increases can help you benefit from higher earning years and make up any shortfall as you approach retirement.
Getting expert financial advice can help you to select which pension investments best match your attitude to risk.
A financial adviser will also give you regular updates on how your investments are performing and will monitor the market to see whether you can improve that performance.
Retirement income usually comes from a mix of the State Pension, workplace pensions, and private savings.
Many people also utilise Individual Savings Accounts (ISAs), investments, or property income to top up these sources.
Having diverse income streams provides flexibility in how funds are withdrawn and helps manage taxes and lifestyle needs over time.
While pensions grow in a tax-efficient manner, withdrawals are usually taxed as income. In contrast, proceeds from ISAs can be withdrawn tax-free.
Understanding how these sources work together helps you organise your finances in a way that supports your objectives.
If you have a defined benefit pension which you’re looking to finance your retirement, you will need to choose how to access the money.
You could choose to withdraw money from the pot as and when you need to — this is known as pension drawdown.
You could choose to use some or all of your pension pot to buy an annuity. A lifetime annuity is an income which will be paid to you for the rest of your life, regardless of how long you live.
Instead of a lifetime annuity, you might want to buy a fixed-term annuity. This provides income for a specific period of time such as 5, 10 or 20 years. At the end of the term, a lump sum is often paid out.
Fixed-term annuities are becoming more popular for people to finance the ‘gap’ between taking retirement and receiving your State Pension.
Taking professional advice can be highly beneficial when it comes to choosing how to fund your retirement.
Your financial adviser can advise on which financing route would work best for you and can help guide you through the variety of options available when it comes to annuities.
And if you are intending to pursue the drawdown route, a financial adviser can help you on investment decisions and the most tax-efficient way to take money from your pension pot.
Planning for early retirement often involves balancing ambition with practicality.
You will need to consider carefully how long your savings may need to last, especially as life expectancy continues to rise in the UK.
Retiring at 55 could mean funding up to 30 years of living costs – and potentially even more.
Even with careful saving, unforeseen events such as market fluctuations or personal circumstances can greatly affect outcomes.
Your financial adviser can monitor your progress and keep you updated on pension and taxation rules to help you adapt to changing conditions.
An adviser can also act as a useful ‘sounding board’ for your ideas about your retirement and provide much-needed peace of mind and confidence about the financial decisions which shape the rest of your life.
Achieving financial independence before State Pension age requires time and discipline.
Knowing what income you will depend on and how long it needs to last can help set realistic goals for the future.
If early retirement is on your mind, speak to a financial adviser today to explore whether it’s achievable for you — and the steps you can take to make it happen.
Disclaimer: This article is for informational purposes only and does not constitute financial, tax, or legal advice. Tax treatment depends on individual circumstances and may change. The value of investments can go down as well as up and you may not get back the full amount you invested. Past performance is also not a reliable indicator of future performance. Always seek professional advice before making financial decisions.
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Pension & retirement
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Pension & retirement
Planning & protection
Pension & retirement
Pension & retirement
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