How do I calculate my pension gap?

Pension gap = target annual retirement income minus projected annual retirement income from all sources (state pension, DB pension, DC pension income, investment income). Express in today money using inflation adjustment.

What is a typical retirement income target?

PLSA (Pensions and Lifetime Savings Association) UK standards: Minimum £14,400/year (meets basic needs). Moderate £31,300/year (some leisure). Comfortable £43,100/year (financial flexibility). These are for single people; couple amounts differ.

How much extra do I need to save to close the gap?

Extra annual savings needed = gap amount divided by number of saving years times a growth factor. Rule of thumb: to produce £1,000/year income from a DC pension, you need approximately £25,000 in the fund (using 4% withdrawal).

What if I have a State Pension and workplace pension?

Project each source separately: state pension forecast from HMRC, workplace pension projection from your pension provider, plus any ISA or investment income. Sum all sources and compare to your target income.

How does inflation affect the pension gap calculation?

Inflation erodes purchasing power. A 3% inflation rate roughly halves purchasing power every 24 years. Calculate the gap in real (inflation-adjusted) terms, then convert savings needed to nominal amounts using a future value factor.

Pension Gap Analysis Calculator

Calculate the gap between your projected retirement income (state pension + workplace pension + investments) and your target retirement income. Shows monthly/annual shortfall and required additional savings to close the gap.

Principal ($)

Annual Rate (%)

Years

Compounding / Year

$ Finance Disclaimer: These calculators are for educational and illustrative purposes only. Results do not constitute financial advice. Consult a licensed financial advisor before making investment or borrowing decisions.

How to Use

Enter the values for the scenario you are assessing. Calculate the gap between your projected retirement income (state pension + workplace pension + investments) and your target retirement income. Shows monthly/annual shortfall and required additional savings to close the gap. Use the pension gap analysis result to inform your calculation.

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Frequently Asked Questions

How do I calculate my pension gap?

What is a typical retirement income target?

How much extra do I need to save to close the gap?

What if I have a State Pension and workplace pension?

How does inflation affect the pension gap calculation?