How long will my pension last?

The answer does not depend only on the size of your pension pot. It also depends on when you’ll retire, when you’ll receive the State Pension, how much you plan to spend, how you’ll take your pension, how your investments perform, and how long you’ll live.

A pension pot of £300,000 may last many years for one person and run down quickly for another. A £500,000 pension may sound comfortable, but it can still come under pressure from early retirement, inflation, care costs, or large withdrawals.

That’s why comprehensive retirement planning should start with an analysis of what you want your retirement fund to do.

Step 1: How much do you actually spend?

Before you can work out how long your pension will last, you need to know how much you are likely to spend each year.

This is sometimes called your ‘burn rate’. It is the amount of money you need your savings, pensions, and other income to cover.

For example, for some retirees, £1,200 a month may cover the essentials, especially if they own their home outright and have no major debts. For others, it may fall short once housing costs, transport, holidays, family support, and rising bills are included.

Pensions UK publishes Retirement Living Standards figures that provide a useful starting point. They estimate the cost of different retirement lifestyles each year.

For 2026, the annual figures are:

Retirement lifestyle	One person household	Two-person household
Minimum	£13,900	£22,500
Moderate	£32,700	£45,400
Comfortable	£45,400	£62,700

These are estimated costs for different lifestyles, not exact income targets. They also do not include housing costs because rent, mortgage payments, and other housing commitments vary widely.

The minimum standard covers basic needs, with some money left for social activities. The moderate standard allows more flexibility. The comfortable standard allows more financial freedom and some luxuries.

Your State Pension should also be considered when looking at how long your pension will last. For 2026/27, the full new State Pension is £241.30 a week, or about £12,547 a year. Your own amount may be lower or higher, depending on your National Insurance record.

This means that if you receive the full amount, the State Pension may cover much of the Retirement Living Standard’s minimum lifestyle. However, it’s unlikely to be sufficient on its own for a moderate or comfortable retirement lifestyle.

For example, a single person aiming for a moderate retirement lifestyle of £32,700 a year would need around £20,000 a year in addition to the full new State Pension. That may need to come from workplace pensions, personal pensions, ISAs, savings, investments, rental income, part-time work, or other sources.

The amount you withdraw is only part of the picture, how that income is taxed also matters. Pension withdrawals are usually subject to income tax (after any tax-free cash has been taken), while ISA withdrawals are tax-free.

Carefully sequencing withdrawals across pensions, ISAs, and other assets can reduce the amount of tax you pay over time. In many cases taking a mix of tax-free cash, taxable pension income, and ISA withdrawals can improve sustainability compared to relying on one source alone.

Most retirees tend to spend more in the early years of retirement, when they are more active, before spending patterns change in later years.

Step 2: The ‘income gap’ before the State Pension

Many people ask whether they can afford to retire at 60.

It’s possible to retire before you start receiving the State Pension, such as at age 60. But this will usually mean you start withdrawing from your private pension earlier. Retiring early is one of the most significant factors affecting how long a pension pot lasts because it increases the number of years your savings need to support.

If you retire at 60, your State Pension will not begin until you reach the statutory age - currently 66, rising to 67 by 2028, and planned to rise to 68 during the 2040s. If you were to retire at 60, this would leave six years to fund before you receive the State Pension, during which your private pension and other savings may need to do far more work.

For example, if you predict to spend £32,700 a year from age 60 to 67, that is over £196,000 over six years before allowing for inflation, tax, investment returns, or unexpected costs.

You may be able to reduce the pressure on your private pension during these years by:

Working part-time for a few years
Using cash savings or ISAs before drawing on your pension
Downsizing to free up any equity in your property
Reducing spending in the early years
Delaying larger purchases
Using different pension pots at different times

The early retirement gap is one of the main reasons online pension calculators can be misleading. A calculator will give you a broad projection, but it may be unable to account for what happens when your withdrawals are high before your State Pension starts, then fall later.

This is where understanding cashflow modelling can be helpful. A cashflow model can show how your money might behave over time, including what happens if you retire early, spend more in the first decade, suffer poor investment returns, or live longer than expected.

Step 3: How are you taking your pension?

How long your pension lasts also depends on how you choose to take an income from it.

Most people with defined contribution pensions have several options. These may include taking a lump sum, buying an annuity, using pension drawdown, or combining more than one approach.

In practice, some retirees use a combination of annuities and drawdown. For example, you may use secure income sources, such as the State Pension and an annuity to cover essential spending, while using drawdown for more flexibility or discretionary spending. This can provide a balance between certainty and flexibility.

Annuity

An annuity gives you a guaranteed income for a set period of time or for the rest of your life.

You use some or all of your pension pot to buy that income from an insurance company. Once set up, the income is paid for as long as specified in the annuity’s terms.

The main advantage of an annuity is certainty. If you buy a lifetime annuity, the income does not run out just because you live longer than expected. In that sense, the longevity risk passes to the insurer.

However, a flat-rate annuity does not increase each year to keep pace with inflation. You can usually choose an annuity that increases, but this will normally start at a lower income level. Also, if you use all of your pension pot to purchase an annuity, you won’t have any pension left to keep invested and continue to grow.

Annuity providers also usually offer a range of death benefits, so that you can specify a beneficiary to continue to receive an income.

Pension drawdown

Pension drawdown lets you keep your pension invested and withdraw money from it when you need income.

This can give you more flexibility as your pension may continue to grow if the investments perform well. You can also vary the amount you withdraw as your needs change.

However, drawdown entails greater risk. Your pension pot only lasts as long as your investment returns, contributions from other income sources, and withdrawal strategy allow. If you take too much too early, or markets perform badly, the pot can run down faster than expected.

This is especially important in the early years of retirement. If markets fall while you are taking income, you may be forced to sell investments at lower prices. Your pension then has less money left to benefit from any future recovery.

This is known as sequencing risk. It is one of the biggest risks in drawdown. To put this into perspective, a significant market fall early in retirement, combined with ongoing withdrawals, can permanently reduce the value of your pension, even if markets recover.

A wealth management adviser can help you think about how your pension should be invested during retirement, not only before it. You may still need growth, but you also need to manage risk, withdrawals, and cash reserves.

What is the 4% rule?

The 4% rule is a retirement planning rule of thumb. It suggests that you withdraw 4% of your pension pot in the first year of retirement, then adjust that amount each year for inflation.

The idea is that this withdrawal rate may give a pension pot a reasonable expectation of lasting for a long retirement. The 4% rule was developed using historical US market data and may not fully reflect UK investment returns, inflation, or taxes. In practice, many financial advisers use lower starting withdrawal rates.

A 4% rule example

If you have a pension pot of £300,000, 4% would give you £12,000 in the first year.

That is £1,000 a month before tax.

If you receive the full new State Pension, this could give you a combined income of roughly £24,500 a year before tax, assuming no other income sources.

For a £500,000 pension pot, 4% would give you £20,000 in the first year.

Together with the full new State Pension, that could produce roughly £32,500 a year before tax. This is close to the PLSA’s ‘moderate lifestyle’ figure for a single person. However, it may not be enough for a couple or for someone with higher housing costs, family commitments, or more ambitious travel plans.

These examples are deliberately simple. They do not account for tax, investment charges, inflation, market falls, annuity income, defined benefit pensions, rental income, ISAs or changing spending patterns.

The flaw in the 4% rule

The 4% rule can be used as a starting point, but it is not a guarantee and cannot account for:

When you will retire
Whether you will receive the full State Pension
How long you will live
How your pension is invested
What charges you pay

Nor can it know whether:

Markets fall early in your retirement
Your spending will rise or fall
You will need to support family
You will face care costs later in life

It also assumes a fairly steady withdrawal pattern. Real retirement spending is rarely that predictable.

Many people spend more in the early years of retirement when they are more active. Spending may then fall, before rising again later if health or care needs increase.

This is why the 4% rule should be treated as a very rough guide, not a retirement plan.

The risks that deplete your pension pot faster

Even a well-funded pension can come under pressure. The main risks are inflation, longevity, and care costs.

Inflation

Inflation reduces the buying power of your money. As prices rise each year, the same income buys less over time. This means you need more income each year to maintain the same lifestyle.

You need to take this into account regardless of how you choose to take your retirement income. With drawdown, you may be forced to withdraw more to keep pace with rising costs, which can deplete your pot faster. With a flat-rate annuity, you cannot increase the income at all – it may be comfortable at first, but its spending power steadily erodes.

Longevity

Living longer than expected is good news personally, but it creates a financial planning challenge.

Even if you retire later, your income may still need to last for decades. For example, for a couple retiring in their mid-60s there is a strong chance that at least one partner will live into their late 80s or 90s. This means retirement income may need to last 25-30 years, or more.

The risk is not solely that you live longer than your retirement fund is designed to support. It is that you live a long life while also dealing with inflation, market falls, tax changes, and changing care needs.

Care costs

Later-life care can be expensive and difficult to predict. Residential care can cost tens of thousands of pounds per year, depending on the level of support required and location.

Not everyone will need long-term care. However, it is important to consider what might happen if you do. Care costs can affect how much you can spend earlier in retirement, whether you want to preserve money for a spouse or partner, and how much flexibility you need in later life.

You do not need to plan for every possible outcome in detail, but you do need to understand how resilient your retirement income would be if something were to change.

How to ensure you don’t run out of money

There are only a limited number of ways to guarantee retirement income. A lifetime annuity can provide an income for life, subject to the terms you choose and the financial strength of the provider. The State Pension also provides income for life, although the amount depends on your entitlement, and it is unlikely to be sufficient on its own.

On the other hand, drawdown cannot guarantee that your pension will never run out. If you keep your pension invested and take withdrawals, there will always be some risk.

Fortunately, you can reduce risk with proper planning.

In particular, a tailored retirement income plan can help you understand:

How much you’ll need in your pension pot to fund your spending each year
What income is guaranteed, and what is not
How long your pension may last under different scenarios
What happens if you change your retirement date
What happens if markets fall early in retirement
Whether your withdrawal rate is sustainable
How your withdrawals may need to adjust over time if markets perform differently from expectations
What ‘guardrails’ or spending limits you could use to help avoid withdrawing too much too early
Whether an annuity, drawdown, or a combination may suit you
How much investment risk do you need to tolerate
The ways taxes may affect your withdrawals
How to preserve flexibility for later life

In practice, retirement income planning is rarely static. It often involves adjusting withdrawals over time. For example, reducing spending slightly after poor market returns, or increasing it when investment performance is stronger than expected.

This is where cashflow modelling can be particularly valuable. Instead of giving you a single answer, it can show you a range of possible outcomes. For example, it can model what happens if you spend more in the first ten years of retirement, if inflation remains high, if investment returns are lower than expected, or if you live into your 90s. It can also help you make better decisions before you retire. You may find that you can retire earlier than you thought. You may find that you need to work a little longer. You may decide to spend with more confidence, or to take less risk.

If you are not sure how much your pension is worth, it may help to start by reading our guide: What is my pension worth?

Need help working out how long your pension will last?

Running out of money in retirement is a real concern, but a tailored retirement plan can help you plan for the future.

At Alan Boswell Group, our independent financial advisers can help you understand your retirement income options, model different scenarios, and build a plan around your circumstances. To find out more, get in touch on 01603 967967.

The value of investments and any income from them can go down as well as up and you might not get back the original amount invested. The past is not a guide to the future. The value of tax benefits depends on your individual circumstances. Tax laws can change.

Financial planning advice

Our independent financial advisers will take you through your options, enabling you to navigate the tax implications and make the most of your hard-earned pension.

To find out more, speak to an expert. We’ll discuss your current circumstances and what you hope for retirement and create a tailored plan for your financial future.

Speak to us: 01603 967967

In this article

In this article

Step 1: How much do you actually spend?

Step 2: The ‘income gap’ before the State Pension