Is a £1m pension pot enough for retirement?

Pensions and retirement
Views & insights

Find out how much income a £1m pension fund could provide and whether it’s enough for a comfortable retirement.


8 June 2023 | 3 minute read

For most people, a £1m pension will be more than enough to retire on. However, if you’re aiming for a retirement filled with luxury holidays, designer clothes, weekends away and long lunches with friends, you’ll most likely need a significant pension pot to sustain your standard of living.


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How much does retirement cost?

According to the Pensions and Lifetime Savings Association (PLSA), a ‘comfortable’ lifestyle in retirement would cost £37,300 a year after tax for the average single person or £54,500 a year after tax for the average couple1.

This would allow spending of £144 a week on food, up to £1,500 a year on clothing and footwear, holidays in Europe for three weeks every year, and replacing your kitchen and bathroom every ten to 15 years. 

Whether this is enough for you will depend on your own version of what constitutes a comfortable retirement. You might be happy with a more modest lifestyle or want something a bit more extravagant.

How much retirement income could £1m provide?

Our analysis shows a 66-year-old retiring with a £1m pension fund who opts for income drawdown could draw gross income of just over £62,000 a year until age 87, or around £50,000 a year until age 95. This assumes annual investment growth of 5% after fees and that the income increases annually with inflation (at 2%).

If the same individual retired at age 60, they could draw £50,000 a year until age 88, whereas drawing £62,000 a year would see their pension pot run out at age 80. Bear in mind that the average life expectancy for a 60-year-old woman is 87 years, but there’s a one in four chance of living to 94 and a one in ten chance of living to 982.

If you’re worried about running out of money, another option could be to buy an annuity rather than use income drawdown. Lifetime annuities pay a guaranteed income regardless of how long you live for. Currently, someone who buys an annuity at age 66 could expect gross retirement income of around £58,000 a year from a £1m pension fund3.

Is my pension big enough?

How much you really need to save for retirement depends on a whole host of factors, including what you plan to do in retirement, when you intend to retire, your life expectancy, inflation and investment growth.

Rather than relying on average figures, a better approach is to speak to a financial adviser. By understanding you and your plans for the future, they’ll be able to give you a more fully informed view of how much your retirement is likely to cost and, in turn, how much you need to save. By speaking to an adviser early on, you’ll have a better chance of making up any shortfall in your savings. 

An adviser will also look at where else you could draw retirement income from. The state pension, ISAs and savings accounts can all help to take the pressure off your pension pot. Taking income from different sources could also prove more tax efficient. For example, you can draw money from ISAs without paying tax, whereas pension withdrawals that exceed your tax-free lump sum are taxed at your marginal rate of income tax.

Next steps

How much you really need to save for retirement is a complex calculation, and that’s where getting some smart advice comes in. A financial adviser can demonstrate how much you’re likely to need, whether you’re on track to achieve that sum, and the steps you can take now to increase your chances of achieving the retirement you desire.

2 ONS life expectancy calculator
3 Annuity assumptions: single life, monthly in advance, no guarantee period, non-smoker, standard (healthy) rates, 2% indexation, payable for life. Quotes obtained from Iress on 5 April 2023.


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The value of investments, and any income from them, can fall and you may get back less than you invested. This does not constitute tax or legal advice. Tax treatment depends on the individual circumstances of each client and may be subject to change in the future. 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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