What income would a £100,000 pension pot give me?

How can I calculate my retirement income?

Of course, no one knows in advance what investment returns they will achieve, and how long they will live. And that makes it really hard to know how much to withdraw from your pension. 

However, experts often recommend the ‘4% rule’ as a rough rule of thumb. This rule means you withdraw about 4% of your pension fund in the first year of retirement. From the second year onwards, you can gradually increase this amount to account for inflation.

The 4% rule helps keep your income rising with inflation while ensuring your pot isn’t used up too soon. Because investment returns tend to average more than 4%, this ensures your pension pot isn’t eroded too quickly and can keep pace with inflation.

How should I take my pension income?

You have several choices when it comes to taking your pension income.

Here is a summary of your options:

1. Taking a 25% tax-free lump sum

You can take a tax-free lump sum from your pension before deciding what to do with the rest of your pension.

The remaining part of your pension pot can be used for income drawdown, to buy an annuity, or both.

You can also take your tax-free lump sum gradually by taking several smaller lump sums, known as uncrystallised funds pension lump sum (UFPLS).

2. Income drawdown

This is where you leave your pension invested and draw income as you need it.

You need to plan carefully to make sure you don’t run out of money.

3. Buying an annuity

You use your pension pot to purchase a guaranteed income for life or a set period.

There are various types of annuities, including options that factor in inflation, offer a guaranteed income even if you die within a set time period, or pay an income to a surviving partner.

Learn more: How to find the best drawdown pension provider

Is £100,000 enough to retire?

The simple answer is that £100,000 probably isn’t enough to retire on its own. But added to the state pension, it’s enough to provide a modest income in retirement. 

Someone retiring with a pension pot of £100,000 could enjoy a total pension income of around £16,548 each year.

The bulk of that income would come from the state pension, which is expected to rise to £12,548 in April 2026. The remaining £4,000 would come from their pension pot, based on withdrawing 4% each year from a £100,000 pension pot.

Whether £16,548 pension income is enough depends entirely on your circumstances, housing situation, and lifestyle. With a mortgage paid off, it might be enough for a frugal lifestyle, although it certainly won’t buy a life of luxury.

According to Pensions UK, a single person needs around £13,400 each year to maintain a basic standard of living in retirement and £31,700 to enjoy a moderate standard of living. That’s assuming they own their own home and don’t have any mortgage costs.

In reality, the amount you need varies hugely from person to person. A couple will often need less than a single person because they can share costs.

What income would a £100,000 pension get me?

The income you might receive from a pension pot worth £100,000 very much depends on your choices.

Assuming you withdrew 4% per year from a £100,000 pension pot, you could enjoy a pension income of around £4,000 each year.

If instead you bought an annuity, you might receive an income of around £5,380 each year, based on figures from Sharing Pensions. This is based on an annuity that rises 3% each year and pays 50% to a surviving partner. 

Buying an annuity could be one of your biggest financial decisions and isn’t reversible, so it’s important to get financial advice.

How to build a £100,000 pension pot

Building a £100,000 pension pot takes time and effort, but it’s surprisingly achievable with small regular investments.

Paying into your workplace pension is the best place to start, as your employer will add their own pension contributions on top of your payments. It’s basically free money, and it makes a huge difference over time.

According to Unbiased’s pension calculator, paying just £133 into your pension each month could swell to £100,000 (in today’s money) over 40 years.

You can use the calculator to work out how much upping your contributions could add to your pension.

How your private pension and state pension work together

Most people in the UK have at least two pensions in retirement - the state pension and a workplace pension. These work together to provide your total pension income in retirement.

The state pension is based on your national insurance (NI) contributions. However, you can also get NI credits in some cases, for example, if you receive child benefit for a child under 12. You need 35 qualifying years to get a full state pension, which is rising to £12,548 in April 2026.

Some people also have other private pension wealth, such as a self-invested personal pension (SIPP). This is separate from a workplace pension and is particularly popular with self-employed workers or those looking to supplement their workplace pension.

How to make your pension last longer

With more of us living for longer, it’s vital to work out how to make your money last the distance. 

There are several traps here:

Withdrawing your money too quickly

It’s important to work out a sustainable withdrawal rate so you can make your pension last throughout retirement.

A qualified financial adviser will be able to help you make investment decisions and plan your retirement to make sure you don’t run out of money.

Losing money through unsuitable investment choices

Although no investment returns are guaranteed, some investments may be more suited to people in retirement.

Experts often recommend selecting investments suitable for cautious to moderate investing risk for those entering retirement.

Unexpected expenses

If possible, it’s a good idea to set aside a savings pot for unexpected expenses, as a few big bills can eat into your pension wealth.

What are the different ways to invest £100,000?

It’s worth sitting down and doing some research before deciding how to invest £100,000. It’s important to think about your tolerance for risk and your financial goals, as this will help you choose the most suitable investments.

Read our guide here on how to invest during retirement for more detailed information about your investment choices and what to consider.

Getting financial advice

When you’re planning your retirement, it’s worth considering getting advice on your pension. Let Unbiased help match you with a qualified financial adviser.

They can help you plan your retirement and provide valuable advice on investing and how to make your pension last throughout retirement.