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Michelle Monck

Consumer Finance Expert
Published: 02/06/2021
empty pension jar

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A survey of 7,000 retirees by consumer organisation Which? estimates those looking for a comfortable retirement need a pension pot of between £192,000 and £305,000 depending on whether they use pension drawdown or an annuity. In terms of income this equates to £19,000 per year to live comfortably when retired.


The study found retirees spend £18,000 on essentials, such as groceries, paying rent or a mortgage, transport costs, utility bills, insurances, shoes and clothes and health products. The study defined a comfortable retirement as including the essentials plus short-haul holidays, recreation and leisure activities, alcohol and tobacco and charitable donations. While a luxury retirement included these plus long-haul holidays, health club memberships, expensive meals out and a new car every five years.


Those planning for retirement can use the research as an indication of how much they might need to save into their pension. While those approaching retirement can use the annual income estimates to help plan how much of their pension they choose to access and when.

How much does a single person need in their pension not?

Pension lifestyle

Annual income

Pension pot estimate - annuity

Pension pot estimate – pension drawdown

Luxury retirement

£31,000

£671,000

£422,140

Comfortable retirement

£19,000

£305,170

£192,290

Essential retirement

£13,000

£123,365

£77,350

Estimates are net of tax and based on someone retiring at 65 ad withdrawing all their income through drawdown over 20 years.

How much does a two person household need in their pension not?

Pension lifestyle

Annual income

Pension pot estimate - annuity

Pension pot estimate – pension drawdown

Luxury retirement

£41,000

£757,000

£442,020

Comfortable retirement

£26,000

£265,420

£154,700

Essential retirement

£18,000

£47,325

£28,810

Estimates are net of tax and based on someone retiring at 65 ad withdrawing all their income through drawdown over 20 years.

Commenting on the estimates, Becky O’Connor, Head of Pensions and Savings, interactive investor, said: “These estimates are a useful guide for people to know the retirement that they are roughly on track for, given their current pension pot size. But the amount we should all aim for is very personal and at the end of the day, depends on circumstances and goals, such as whether you want to leave an inheritance.
“It’s important to think about the lifestyle you have now and how much you would like this to continue when you retire. If your income will be substantially lower, then unless your costs fall dramatically too, you will have to get used to a potential drop in living standards when you stop work.
“Living costs do tend to fall for retired people and these estimates also assume major expenses like housing costs are largely paid off. But bear in mind any costs you expect to continue into retirement that could eat away at your pot faster, such as housing costs, as well as whether you will need to continue to support adult children or leave them an inheritance, should be factored into your own personal calculation for what your retirement pot should be.”

Free introductory pensions advice

Moneyfacts preferred independent financial adviser, Kellands Hale offers Moneyfactscompare.co.uk visitors with at least £100,000 held in a pension, savings or investments a free one-hour consultation. Find out more.

Is it worth buying an annuity?

The results of this study show retirees looking for the assurance of a guaranteed income through an annuity need to save significantly more into their pension pot than those using pension drawdown. Pension drawdown does not guarantee an income for life and retirees can only drawdown money that has accumulated in their pension pot. Once it is gone, it’s gone. Those choosing to use pension drawdown need to carefully plan how much they will drawdown and when and how their remaining funds are invested to make sure these last for their lifetime. This is where an independent financial adviser can really help in planning a drawdown approach, modelling the effects of this over time, and carefully managing investments.

Annuities cannot be left in a will or as part of an estate unless the holder of the annuity dies within a guarantee period of usually five or ten years or have chosen additional protection. A pension, such as a Self-Invested Personal Pension can have any unused funds passed on to loved ones.
Read more about the differences between annuities and pension drawdown in our guide.

Alternative ways to top up retirement income

Retirees with smaller pensions pots that want to make a large purchase or top up their pension income could consider equity release – as long as they are homeowners. Equity release allows those over the age of 55 to unlock cash trapped in property. This is tax free and those using equity release can remain in their own home until they go into long term care or pass away. Read more about how equity release works.

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