What Is the Average Pension Pot in the UK?
Understand the true picture of average pension pots in the UK, exploring the factors that shape these figures and their relevance to your retirement.
A pension pot in the UK represents accumulated savings and investments specifically designated to provide income during retirement. This financial asset grows through contributions made by an individual and, often, their employer, along with investment returns. Understanding the average pension pot provides a general overview of typical retirement savings across the UK, serving as a broad benchmark for individuals assessing their own planning.
Understanding the Overall Average
The average pension pot in the UK varies depending on the data source and methodology used. As of May 2024, data from PensionBee indicates the average UK pension pot was £20,077. However, the Office for National Statistics (ONS) reported a median pension wealth of £57,500 for those with one or more pension pots, based on data from April 2020 to March 2022. This ONS figure includes both workplace pensions and Self-Invested Personal Pensions (SIPPs). When considering all adults, including those without a pension pot, the overall median drops to £19,700.
These figures highlight the difference between mean and median. A median represents the midpoint where half the population has more and half has less, often providing a more representative picture when data is skewed by large values. The overall average can be influenced by individuals holding multiple pension pots, increasing their combined retirement savings.
How Averages Differ
Pension pot sizes vary significantly across demographics and employment situations. Age is a primary factor; pension pots generally increase over a working life. For instance, ONS data from 2020-2022 shows average pension wealth of £5,500 for those aged 16-24, rising to £18,800 for 25-34 year olds. This trend continues, reaching approximately £39,500 for 35-44 year olds and peaking around £140,000 for those aged 55-74. After age 75, the average may decline to £59,700 as savings are spent.
A gender pension gap exists, with men typically having larger pension pots than women. For example, men aged 45-54 have an average pension wealth of £108,100, compared to £57,900 for women in the same age bracket. This disparity widens significantly by retirement age, reaching £85,000. Factors contributing to this gap include the gender pay gap, career breaks for childcare or caring responsibilities, part-time work, and lower representation of women in senior, higher-paying roles.
Regional differences also influence average pension pot sizes. PensionBee data from May 2024 indicates the South East of England has the highest average pension pot at £25,734, followed by Greater London at £23,393. Conversely, Northern Ireland, North West England, and Wales tend to have lower values. Employment status and sector influence pension averages. Self-employed individuals may also have different pension savings patterns compared to employed individuals.
Influence of Pension Type
The structure of different pension schemes significantly impacts the concept and size of a “pension pot.” A “pension pot” primarily refers to a Defined Contribution (DC) pension. In a DC scheme, contributions from the individual and employer are invested, building a fund whose value fluctuates based on investment performance and fees. The final amount available at retirement depends on contributions, investment growth, and charges. Individuals typically control how these funds are invested, especially with Self-Invested Personal Pensions (SIPPs).
In contrast, Defined Benefit (DB) pensions, often called “final salary” or “career average” schemes, do not involve a literal “pot.” Instead, these schemes promise a guaranteed income in retirement, usually based on salary and length of service. For DB schemes, a cash equivalent transfer value (CETV) might be calculated if an individual wishes to transfer benefits to a DC scheme. This CETV can represent a substantial sum, which, if included in general “average pot” statistics, can inflate figures and make direct comparisons with DC schemes difficult. The State Pension, provided by the government, is a separate entitlement based on National Insurance contributions and is not considered part of a private “pension pot.”
Contextualizing Your Pension Pot
Average pension pot figures serve as general benchmarks, not definitive targets, for individual retirement planning. Each person’s financial needs in retirement are unique, influenced by personal factors. What constitutes an adequate pension pot depends on an individual’s desired retirement lifestyle, other income sources, health considerations, and existing debt. For instance, the Pensions and Lifetime Savings Association (PLSA) estimates a single person needs around £14,400 per year for a minimum retirement, £23,300 for a moderate lifestyle, and £37,300 for a comfortable one.
These averages do not account for individual circumstances, such as homeownership or ongoing housing costs. For example, a single homeowner may require less annual income than a renter to achieve a similar standard of living. The cost of living, which fluctuates, also affects the purchasing power of a pension pot over time. Therefore, while average figures offer a broad perspective, personal financial planning should be tailored to specific goals and circumstances, as individual retirement pathways vary significantly.