£100,000 pension pot, is it enough to retire?

Many people we speak to ask us ‘Do I have enough to retire on?’.

While it is suggested that you only take a small percentage from your pension fund annually, potentially as little as 3-4%, it all depends on the number of outgoings you will have and how comfortable you want your retirement.

£100,000 Pension Pot. What Pension Will 100,000 Buy And Is It Enough To Retire?

Potentially yes, but your retirement income will possibly be around £3,000 to £4,000 per year or approximately £76 a week, not including a state pension, if you qualify. It is a low amount to enjoy in retirement, and would barely cover the essentials of food, council taxes, and utilities.

Your retirement income could be higher or lower than that, depending on various circumstances, including how and when you choose to access your pension.

What retirement income can I get with a £100k pension pot?

Whether you plan on relaxing beside a pool in retirement, traveling the world, or sitting at home and watching TV, there’ll be one burning question at the front of your mind. How much will I have to spend? As we mentioned previously, the amount of income you will have is dependent on several factors.

How can I calculate my pension income? 


To calculate the precise amount you’re likely to receive as pension income once you retire, you must first take into account:


  • The specific nature of the pension product you or your employer are using
  • In the case of a workplace pension, the percentage of your total earnings paid into your pension pot both by yourself and your employer (as of 2019, the minimum for this is 3% to be paid by your employer and 5% by you)
  • In the case of your state pension, the amount of National Insurance Contributions (NICs) that have been made to date, and that will be made between now and your retirement
  • The performance of any investments related to your pension
  • Whether you have opted for a pension drawdown or an annuity
  • Any related fees or taxes


The maximum amount you could receive for your UK state pension is £179.60 per week, if you qualify for a full state pension.


There are numerous online “calculators” available that can help you to determine in detail the amount of state, workplace or personal pension income you will receive as well the income you will get from a pension drawdown or annuity based on the amount you are currently saving.


Hilltop Finance has a handy Pension Fees Calculator to help you determine your pension performance more clearly.


The best way to get an accurate figure for your overall pension income is to get in touch with a specialist financial advisor. Contact Hilltop Finance today for assistance in this area.


How can my private and state pensions work together?


Your private or workplace pension will have no impact on the level of state pension you will receive. 


This is because state pension income is based entirely on the National Insurance Contributions you have made throughout your working life, whether through your employer or voluntarily as a self employed individual.


Private and workplace pensions, on the other hand, rely on separate contributions either made by yourself or by a combination of yourself and your employer.


While the combined sum you will receive via all of your pension pots may have something of an impact on any state benefits you’re likely to receive if it passes a certain threshold, no one pension product will affect the retirement income gained via another. You will need to also consider Lifetime Allowance, which is a threshold for tax on your pensions. 

When can I retire?

One of the main factors in working out how much money you will have to spend is the age at which you retire. Of course, the earlier you retire, the longer you will need to make your pension pot last, and thus reduce the amount of money you could comfortably take each year. As a rule, it’s suggested that you take 3-4% of your pension fund annually, depending on your circumstances. By taking this lower amount per year, will hopefully enable your pension to last through retirement.

You can access your pension at 55 years old, and take a tax-free lump sum should you wish. But, we always suggest caution when considering a lump sum, as any money you take now, could have a detrimental impact on your later life. You should only take the tax-free cash if you only really need to, like paying off your mortgage.

For instance, a 55-year-old man in the UK can, on average, expect to live to 84, while a 55-year-old woman would, on average, live to 87. Of course, your life expectancy could be different and dependent on your health and lifestyle choices.

Based on people retiring at state pension age**, the current average retirement timeframe could be around 17 years for men and 22 years for women, you would need our pension fund to hopefully last approximately 20 years, depending on your health and lifestyle.

**UK state pension age varies depending on your date of birth

How will you take your pension?

There are three primary choices of how to take your retirement income if you have a defined contribution pension. These are either a pension annuity or through pension drawdown. Everyone is also entitled to receive a 25% tax-free lump sum from your defined contribution pension at 55 years old or over.

  • Option 1: A pension annuity

A pension annuity is an insurance policy that will pay you a set income for a period, potentially for the rest of your life. The level of income you could receive depends on the annuity rate at the time you buy it, the length of time you wish to receive income, and your health and lifestyle choices. Learn more about annuities here

For example, being 65, in reasonably good health, with a £100,000 annuity purchase with Aviva, you could potentially receive £4,500 a year for the rest of your life.*

*figures from direct.aviva.co.uk/myfuture/PensionAnnuityCalculator  06.07.20. £100,000 pension fund, male, 65 years old, not smoker, moderate drinker.

How can I get a larger annuity?

Annuity rates may look disappointing – four to five thousand a year seems very little for such a significant outlay of £100,000. But this is because the insurance provider has to allow for the fact that you might live longer than they anticipate. The insurance company could be potentially required to payout more than your £100,000 investment if you live longer than they expect.

For instance, if you live to 90 years old and retired at 65, the insurance company would have paid you £112,500^, for your £100,000 investment.

^Figure of £112,500 is based on retirement of 25 years x £4,500 annually.

The flip side to this is if you have any health or lifestyle conditions that could potentially shorten your life expectancy. Having a health condition, or other risk factors in your lifestyle may qualify you for an enhanced annuity. This will pay out more per year than a standard annuity. If your health conditions are severe, the income may be a great deal higher.

  • Option 2: Pension Drawdown

With pension drawdown, you can withdraw money from your pension when you need it and keep the remainder invested with the potential to grow. In a drawdown plan, the onus is on you to manage your money and withdrawals, with the aim of not running out of funds later in your retirement. There are no guarantees with drawdown – once the money is gone, it is gone. This means you need to work out a ‘safe’ income level that will use up your savings at the right speed.

The main issue with pension drawdown aside from having to manage your withdrawals is the stock market. As your funds remain invested, there is the potential that you could lose valuable retirement income in a stock market crash or dip. It’s worth checking with a financial adviser to find out the risk category of your current pension and potentially moving your funds to a more secure policy.

How could I make my drawdown pot last longer?

Here are some tips for taking a drawdown income to reduce the risk of running out of money.

  • Move your funds to a more secure pension policy.
    Don’t bank on your pension product that was good for growth while you were still working to be as safe as a low-risk fund. Protect yourself against substantial losses by moving your funds to lower risk, actively managed pension when in retirement.
  • Think about the future
    Now you’ve reached retirement; you want to make the most of that free time. Travelling the world or buying that sports car you’ve always wanted is a considerable temptation now you’ve £100,000 burning a hole in your pocket. Resist that temptation, and always remember this pension pot will need to last you for the rest of your life.
  • Continue to work
    If possible, to supplement your retirement income, you could consider working part-time while you’re still fit and able. By reducing your hours, you could yet have a steady income stream and not be so reliant on your pension to cover your bills.
  • Consult an independent financial adviser
    Before taking any retirement income, always speak with an independent financial advisor who is authorized and regulated by the Financial Conduct Authority. The team at Hilltop Finance, for example, will use their experience and knowledge to put together a retirement plan for you, that could help extend the amount of income you could enjoy.
  • Option 3: Drawdown plus annuity

A third option is to split your pension pot between an annuity and a drawdown product and get the best of both worlds. You could use an annuity to cover your monthly expenses like council tax, utilities, food etc. and use drawdown to take money out when you need those little luxuries.

That said, with £100,000 pension fund, the drawdown pot may be a lot smaller than you’d like, but at least your essentials are covered for.

What Pension Will 100,000 Buy?

A £100,000 pension fund might not provide you with the retirement you had been planning, and apart from the apparent alternative of working longer, there are a couple of options available to you.

Firstly, speak with an independent financial adviser as soon as possible. Following a quick assessment, they can put a plan together that could help you to maximize the amount of money you can save into your pension while still working. Moving your pension funds into a policy that charges less, could help you to save quicker.

Secondly, can you save a little more into your pension than you currently are? Making a couple of small changes today could help boost your pension pot over the next few years, which will hopefully give you a little more to enjoy.

All is not lost if you have a pension pot of £100,000 or lower but taking action sooner rather than later could help you to avoid a more challenging retirement than you would like.

The information contained within this article shouldn’t be regarded as financial advice. Everyone’s circumstances are different, and we would always recommend speaking with a financial adviser like Hilltop Finance.

Visit our dedicated pages for pension annuities or pension drawdown to learn more about your options or call us on 0161 413 7051 for an informal chat with our team and see how we can help.

Important information: Our website offers information about investing and saving, but not personal advice. If you’re not sure which services are right for you, please request advice from Hilltop’s independent financial advisers. Remember that investments can go up and down in value, so you could get back less than you put in.

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