How long will my pension pot last?

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Unless you choose to take your retirement income as an annuity – a guaranteed income for life – it’s up to you to make sure your pot lasts throughout your retirement. But how do you work out how long your pension income will last? And what do you need to think about? We cover everything you need to know.

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Retirement looks different to everyone. Whether you have plans to travel the world or are looking forward to a quiet life spent with loved ones, you want to be sure that your pension savings will last you long enough to cover the costs. And how long your pot will last really depends on four things…

1. How much you’ve saved into your pension

The amount you’re saving - or have already saved - into your pension will make a big difference. You want to make sure you’ve saved enough to cover everything you want to do in retirement, plus the necessities. 

If you’ve stopped work and finished saving, check your balance so you know what you’re working with. Make sure you’ve accounted for any old workplace pensions you might have forgotten about. You can find out how to track down old plans in our article. If you find your retirement savings are spread across a few different plans, you might find them easier to manage if you bring them all together. Transferring isn’t right for everyone though, so check with a financial adviser if you’re not sure.

If you’re still saving, our pension calculator can help you work out how much money you could have in your pension pot when you come to retire.

Don’t forget to account for the State Pension too. If you’ve made over 30 years’ worth of National Insurance contributions, you’ll be entitled to receive it when you reach State Pension age. From April 2023, those qualifying for the full new State Pension will receive £203.85 a week. And those who are on the older, basic State Pension will receive £156.20.

Although this will give your retirement income a welcome boost, the State Pension on its own would give you less than a minimum wage salary each year. So it should only make up part of your retirement income and shouldn’t be relied on completely.

2. What’s a good monthly retirement income for you?

What counts as ‘good’ for you will really depend on the kind of lifestyle you’d like to have in retirement. The Retirement Living Standards can give you an idea of how much you might need to fund a ‘minimum’, ‘moderate’ or ‘comfortable’ lifestyle. 

For example, they say £12,800 should cover all the needs of a single person, with some left over for fun. £23,300 a year should give you some more financial security and flexibility, and £37,300 a year would give you more financial freedom and cover some luxuries.

You can also use our handy retirement tool, which is based on these standards, to calculate how much you might need.

3. How your pension investments perform

Even when you start taking money from your pension, anything left in your pot will stay invested. And how those investments perform could impact how long your income will last. If they go up in value, you can use the investment growth as extra income. But you’ll also need to be prepared that their value may go down as well and you could end up with less income. If markets are fluctuating – here’s what you should consider.

You should regularly review your investments to make sure they’re still right for you, as what you need from your investments will likely change as you get older. 

If you’re a Standard Life customer, you can review your investments by logging in online or on your app.

4. Your life expectancy

Your life expectancy is an important factor. You don’t want to spend too much of your pension savings up front and find you run out too quickly. On the other hand, you don’t want to live on any less than you need to. 

The Office for National Statistics (ONS) suggests the average life expectancy for a 66-year-old female is 87 and 85 for a 66-year-old male. Which means if you were to retire at 66 (the current State Pension age), you’d potentially have to fund at least 20 years of retirement. And with a one-in-four chance you’d live to age 92 – it could be even longer.

You can use the calculator on the ONS website to work out your life expectancy. 

What else can affect how long your pension will last?

• Inflation: As prices rise, you’ll be able to buy less with your pension income. If you keep your remaining funds invested, your pension income will be more likely to rise with inflation than if you were to keep them in cash savings – but this all depends on the rate of inflation and the how your investments perform. You can find out more about how inflation impacts your investments in our article.
   
• Tax: You’ll pay income tax on the money you take from your pension savings. But how you choose to take your money could make a difference to how much you pay in tax and how much ends up in your pocket. Read our article for some tax-efficient tips.
   
• Other sources of income: Your retirement income doesn’t need to come from your pension pot alone. Using cash savings, Individual Savings Accounts (ISAs) or other investments to help fund your retirement could mean you can leave more of your pension savings invested for longer.

Putting a plan in place

Once you know how long your pension pot might last, you can then make a clear plan for retirement. Found that there’s a shortfall between what you want and what you have? Consider if you can afford to pay a little more into your pension plan to help you achieve the lifestyle you want. 

If you’re a Standard Life customer you can manage your pension payments online. Simply log in or use your app.

If you’re feeling ready to retire or unsure about your options, think about getting financial advice. If you don’t have a financial adviser, you can find one in your local area at unbiased.co.uk. Or Pension Wise, a service from MoneyHelper, offers free, impartial pension guidance to over 50s.

The information here is based on our understanding in January 2023 and should not be regarded as financial advice.

A pension is an investment, the value can go down as well as up and you could get back less than you paid in.

Standard Life accepts no responsibility for information contained on external websites. This is for general information only.