How much money you will need in retirement will very much depend on your needs and wants during that time of your life. Someone who plans to spend their retirement at home gardening will have very different financial requirements to someone who plans to travel, see the world and make the most of their non-working life. A pension is designed to replace the income you would normally receive during your working life once you retire. Although the majority of people will be eligible for the government's State Pension when they retire, at current levels of less than Â£90 a week, many pensioners who receive it now struggle to make ends meet. However, if you have a separate pension plan, this can boost your income to ensure that your needs and lifestyle requirements are met in later life.
It is difficult to understand exactly how much each person will require for their pension, as everyone's circumstances are very different. For most people, the decision depends on how much they can afford to save each month. When you give up work, you will have much more leisure time, and heating, lighting and other household costs may also go up as you stay at home more often. But some costs of living may be lower when you retire - you will not need to pay National Insurance contributions, there will be no travel costs to work, you may have paid off your mortgage and you may no longer be supporting a family. Once you come up with a realistic figure and added in an amount as a cushion for the unpredictable expenses, then this is the amount of pension that you should ideally be planning for. It is also worth keeping in mind that your pension will be taxable, so you will need to allow for income tax when arriving at your final pension figure.
Although it is easier to think that there is all the time in the world to start planning your retirement, the reality is that the earlier you start saving for your retirement, the more money you are likely to have to pay the bills and enjoy yourself when you retire. Starting a pension when you are young will not only mean that you will have more time to save up, it will also mean that your pension fund will have longer to attract interest and accumulate in value.