How long will my pension last in retirement?

Pensions and retirement
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Will your retirement savings go the distance? Find out how long your pension might last by asking yourself these questions.

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2 May 2024 | 3 minute read

Whether you’re planning on travelling the world, learning a new hobby or spending more time with friends and family, you need to feel confident that your retirement savings will go the distance.

How long your pension lasts in retirement will depend on several factors that are completely personal to you, including how much you’ve saved, your life expectancy and your desired retirement income. It will also depend on things like inflation and how well your investments perform.

A financial adviser can give you a clear picture of how long your savings are likely to last, but the following questions should help you get started.

   


 
     
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How much have I saved so far?

The first step in understanding how long your pension is likely to last is to work out how much you’ve saved so far. This might seem obvious, but it’s possible you’ve accumulated several workplace pensions over your career, some of which you may have forgotten about. Ask your pension providers for an up-to-date valuation, and use the government’s free pension tracing service to track down any lost pensions.

Don’t forget the state pension, which currently pays £221.20 per week (around £11,502 a year) for those who qualify for the full rate1. You might also have other sources of retirement income, such as ISAs and savings accounts. A financial adviser can review all your savings and investment pots to give you a true picture of your retirement savings.

What’s my life expectancy?

Latest figures from the Office for National Statistics show a 66-year-old woman has an average life expectancy of 87 years2. However, they also have a one in four chance of living to 94 and a one in ten chance of living to 98. For a 66-year-old man, the average life expectancy is 85 years.

If you stop working at age 66, which is the current state pension age3, your savings may need to last for 20 or even 30 years in retirement.

How much retirement income do I need?

How much retirement income you need each year will depend on your lifestyle in retirement. Travelling the world, for example, is likely to cost significantly more than pottering around your garden.

The Pensions and Lifetime Savings Association (PLSA) has calculated that the average single person needs £43,100 a year after tax to fund a ‘comfortable’ retirement, while the average couple needs £59,000 a year after tax4. This would cover all your basic needs as well as some luxuries, such as a fortnight on a four-star Mediterranean holiday, replacing your kitchen and bathroom every ten to 15 years, and replacing your car every five years.

Bear in mind that these are average figures. An adviser can help you add up your expected outgoings and then explain what level of retirement income this would translate into.

How long would a comfortable retirement income last?

Our analysis shows that if you retired at age 66 with a £500,000 pension and started withdrawing net income of £43,100 a year (£50,887 before tax), your pot could run out by age 78. This assumes the fund grows at an annual rate of 5% after fees and the income increases annually with inflation (assumed at 2% p.a.). If you retired with a £750,000 pension, your pot could last to age 86.

Remember, the state pension could boost your income by around £11,502 a year, perhaps enabling you to withdraw a lower amount from your personal pensions. If, for example, you started withdrawing net income of £31,598 a year (£39,385 before tax) from a £500,000 pension, your pot could last around four years longer to age 82 (based on the same assumptions as above). For a £750,000 pension, you could still have money left in your pot at age 95.

Another way of funding retirement is to buy an annuity. This pays a guaranteed income for life, no matter how long you live. A financial adviser can guide you through the pros and cons of annuities and income drawdown, so that you can make a fully informed decision on what’s right for you.

Next steps

Understanding how long your pension will last in retirement can provide clarity and peace of mind about your future. However, it is a complex calculation with many variables – and that’s why it’s important to get financial advice from someone who understands your individual circumstances.

An adviser can show how long your retirement savings are likely to last, explain the best way to access your pension in retirement, and check your money is invested in a way that suits your needs and goals.


The value of investments, and any income from them, can fall and you may get back less than you invested. Neither simulated nor actual past performance are reliable indicators of future performance. Information is provided only as an example and is not a recommendation to pursue a particular strategy. Information contained in this document is believed to be reliable and accurate, but without further investigation cannot be warranted as to accuracy or completeness. Forecasts are not a reliable indicator of future performance.


   


 
     
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