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How much do you have in your pension pot? Is it enough to fund the retirement you want?
It can be hard to know how big your pension pot actually needs to be – and research shows that most people get it wrong, as well as that many people are under-saving for retirement.
We’ll explain what different sizes of pension pot mean for the annual income you can expect, and the important points you need to consider.
What’s on this page?
To understand how much money you’ll have to retire on, it’s important to factor in the state pension. For most people, this provides the basic foundation for their retirement income.
The full new state pension for 2025/26 is £11,973 per year – provided you have enough years of national insurance contributions. People who reached retirement age before 2016 receive a different amount (the old state pension).
Unless there’s a significant change in government policy, the state pension will continue rise each year, at least in line with inflation, thanks to the triple lock.
Any income from your private pension will be on top of this amount.
The table below gives an illustration of the total annual income you might get from your pension pot. This is based on defined contribution pensions – the most common type, where your final retirement income depends on the amount you’ve saved and its investment growth. If you have a defined benefit pension, like career average or final salary, then you already have a pension that gives you a guaranteed income (based on how long you work there and your salary during that time).
The incomes below are based on combining the full state pension with a 4% annual withdrawal from your defined contribution pot. This ‘4% rule’ is not foolproof, but it’s a common guideline for helping to ensure your money lasts throughout retirement.
You might get similar income by buying an annuity – the amount you’d get from an annuity will depend on factors such as your health and lifestyle, annuity rates at the time you take it out, and whether you want the annuity to come with any additional benefits.
| Pension pot size | Annual income from pot (4% drawdown) | Total gross annual income (including full state pension) | Monthly gross income (approx) |
|---|---|---|---|
|
£202,000 |
£8,080 |
£20,053 |
£1,671 |
|
£326,000 |
£13,040 |
£25,013 |
£2,084 |
|
£452,000 |
£18,080 |
£30,053 |
£2,504 |
|
£576,000 |
£23,040 |
£35,013 |
£2,918 |
|
£702,000 |
£28,080 |
£40,053 |
£3,338 |
|
£952,000 |
£38,080 |
£50,053 |
£4,171 |
|
£1.2m |
£48,000 |
£59,973 |
£4,998 |
|
£2.2m |
£88,000 |
£99,973 |
£8,331 |
This table is for illustrative purposes. It assumes you are entitled to the full new state pension (£11,973 for 2025/26) and that you withdraw 4% from your pension pot each year. All figures are gross, shown before any income tax is applied.
Remember that pension income is taxable, just like a salary. While you can typically take 25% of your pot tax-free (as one or more lump sums), any other income you draw is added to your state pension income for the year.
You’ll pay income tax on the total amount that is over your personal allowance (currently £12,570). For example, a total gross income of £30,053 mean an annual income tax bill of around £3,500, reducing your take-home amount.
The Pensions and Lifetime Savings Association (PLSA) has researched what a ‘minimum’, ‘moderate’, and ‘comfortable’ retirement might cost. Their figures start at £13,400 for one person (which means a gross income of £13,608 before tax), or £21,600 for two people (after tax) for a ‘minimum’ level.
These amounts don’t include rent or mortgage payments, and costs might be higher in some parts of the country. Read more in our article on the cost of a comfortable retirement.
Andrew King, pensions and retirement specialist at wealth management firm Evelyn Partners, says: “For higher earners who are reluctant to forego many of those advantages, a ‘comfortable’ retirement will require higher incomes and bigger pots than the standard set by the PLSA. But others will have lived on a lot less during their working lives, and people can also cut their cloth to match what savings they have and maybe boost that by trading down to a smaller property, for instance.”
When you come to access your defined contribution pension, you have two main choices: income drawdown or buying an annuity. Annuities have increased in popularity over the last couple of years, although most people choose income drawdown.
Clare Moffat, tax and pensions expert at Royal London, explains that some people may want complete flexibility with their retirement income, which explains the popularity of drawdown. For others, buying an annuity offers the comfort of a guaranteed income.
“An advantage with drawdown is that you can take as much or as little as you want but the disadvantage is that you have to make sure it lasts until your, or your partner’s, death and people often underestimate how long they might live.”
The 4% rule is often used as a guide to income drawdown and it is designed to help retirees reduce the risk of running out of money. It means that you take 4% of your pension pot every year and is popular because it’s a simple rule to follow.
However, some financial planners say the 4% rule is too rigid, and should be handled with caution.
King says financial planners draw up bespoke and detailed plans with cashflow modelling based on the individual’s overall spread of assets and their needs and desires.
That might mean a 4% withdrawal rate or something quite different, and the rate of withdrawal could well change through the years of retirement, as needs and outgoings can alter dramatically through a retirement.
There are also tax considerations, he adds.
“For most savers a 4% withdrawal rate would leave substantial residual pension values at, say, age 90, and that might – as proposals stand, and depending on the size of the estate – be subject to inheritance tax and probably also income tax.”
To get a clear picture of your needs, start by creating a detailed budget of your expected outgoings in retirement. Remember that while some costs like commuting and a mortgage may disappear, others like care or holidays could increase.
Once you have a target income in mind, free online tools like the MoneyHelper pension calculator can give you an estimate of whether you are on track.
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