The ‘£299,325’ cost of matching the State Pension

The State Pension is often seen as a baseline level of retirement income for those who no longer have a salary to rely on.

That can make it easy to forget just how valuable the payment is - particularly when individuals are entitled to the maximum available. Those who reached their state pension age after 2016, and who are entitled to the maximum, get £230.25 a week. That’s £11,973 a year.

But you really see the value of the State Pension when you examine how much it would cost to reproduce by other means - as we show below.

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State Pension: guaranteed, and guaranteed to rise

The reason it is so expensive to recreate with your own retirement savings is that the State Pension is both guaranteed and guaranteed to rise each and every year - not just by inflation but by the ‘Triple Lock’.

The Triple Lock is the promise to increase the State Pension by the highest of either inflation, wage rises or 2.5%. The policy has seen the State Pension rise rapidly in recent years - from £185.15 a week in 2022-23 to £230.25 today, a rise of more than 24% in three years.

The pace of increases is one of the reasons that more people are being pulled into paying tax on their State Pension. The maximum new State Pension income - £11,973 a year - is approaching the £12,570 Personal Allowance for income tax - the amount individuals can earn before any income tax applies. The Personal Allowance is currently frozen and rises in the State Pension, due to the Triple Lock, are expected to see the maximum State Pension exceed it within the next few years.

• Read: Triple Lock: what will the State Pension be in the future?

State Pension - how much is it worth?

According to the latest market prices, replacing the current maximum State Pension (available to those retiring after 5 April 2016) would cost the equivalent of £210,311 in pension savings¹. That’s based on buying a financial product - an annuity - to replace the income provided by the State Pension.

An annuity lets you exchange money saved inside your pension for a guaranteed income. The rates on annuities fluctuate but right now the rate paid to a healthy 65-year-old is around 5.7%². That’s with income payments escalating by 3% a year to combat rises in prices.

On the basis of that rate, it would require £210,311 of pension savings to replace the current full State Pension of £230.25 a week.

Note that annuities are typically purchased using pension pot money after any tax-free cash has been taken.

Annuities are not the only way to get an income from retirement savings. Income drawdown allows you to leave your money in your pension pot and take income or lump sums from it as and when you want. A rule of thumb is that you can withdraw around 4% a year from a drawdown pot and still have a good chance that your savings last for 30 years.

Based on that, you would need £299,325³ of pension savings in drawdown to recreate State Pension income - more than an annuity and without the guarantee that income will last until you die, but with the benefit that the money remains yours.

• Read: How quickly will UK pension ages rise?

Why is the State Pension is so valuable

^{Source: Williamburroughs.com, as at 14.07.25}

How to get there

Saving those sorts of sums is no mean feat - but the job is made easier the earlier you start. For example, someone aged 30 and saving until their projected state pension age of 68 would have to set aside about £234 a month into a pension, assuming 5% investment growth after all fees, in order to achieve a pot worth the £299,325 needed to recreate an income to match the current state pension. This is purely illustrative - investment returns are not consistent, and the value of your money can fall.

And remember that the State Pension in the future is very likely to be significantly more than it is today in cash terms, so to truly match it with your pension would require you save significantly more. One way to achieve that is by escalating your contributions. In our example, a 30-year-old may begin by saving £225 a month but could increase this in line with their wages as their career progresses. 

Maxing out your State and Personal Pensions

Given the high cost of getting it any other way, it makes sense to maximise the income you get from the State Pension. Your entitlement to the State Pension is based on your National Insurance (NI) contributions. To get the full State Pension you need to have made NI contributions for 35 complete years by the time you retire.

Those working as employees are likely to have NI taken automatically from their pay, while self-employed people with earnings above a certain level will pay their contributions via self-assessment.

The government has an online service that lets you check on your NI record for any gaps and to see whether you’ll get the full amount. If you have gaps in your record, you may be able to pay voluntary NI contributions to fill them, or else fill them with NI credits that apply in some circumstances.

For your personal pension saving, make sure you are making maximum use of any contributions your employer is willing to make on your behalf. If what you’re paying in is still likely to leave you short of achieving your goals, you can increase contributions either into a workplace scheme or via a SIPP - self-invested personal pension - where they will benefit from tax relief.

It can help to consolidate old workplace pension into a SIPP, where you’ll more easily be able to accurately monitor how much you have saved, check your investment returns and adjust mix of investments.

• Learn more on pension transfers

The government’s Pension Wise service offers free, impartial guidance to help you understand your options at retirement. You can access the guidance online at www.moneyhelper.org.uk or over the telephone on 0800 138 3944.

Our retirement specialists also provide free guidance to help you with your decisions. They can provide advice and help you select products too, though this will have a charge.

See our current offers to help your money go further

• Read: How to retire at 55
• Read: What income might I get from a £500,000 pension?
• Read: How much to save? What it takes for a 'comfortable' retirement

Source:

1. (£11,973 / 5.693) x 100 = £ 210,310.91
2. Williamburroughs.com, 14.07.25
3. (£11,973 / 4) x 100 = £299,325

Important information - investors should note that the views expressed may no longer be current and may have already been acted upon. Eligibility to invest in an ISA and tax treatment depends on personal circumstances and all tax rules may change in the future.Withdrawals from a pension product will not be possible until you reach age 55 (57 from 2028). It’s important to understand that pension transfers are a complex area and may not be suitable for everyone. Before going ahead with a pension transfer, we strongly recommend that you undertake a full comparison of the benefits, charges and features offered. To find out what else you should consider before transferring, please read our transfer factsheet. If you are in any doubt whether or not a pension transfer is suitable for your circumstances we strongly recommend that you seek advice from one of Fidelity’s advisers or an authorised financial adviser of your choice. This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to one of Fidelity’s advisers or an authorised financial adviser of your choice.