Pick a pot size
Nine pots at a glance
| Pot | 4% income/yr | Tax-free cash | Net/yr incl. state pension |
|---|---|---|---|
| £300,000 | £12,000 | £75,000 | £21,692 |
| £400,000 | £16,000 | £100,000 | £24,892 |
| £500,000 | £20,000 | £125,000 | £28,092 |
| £600,000 | £24,000 | £150,000 | £31,292 |
| £750,000 | £30,000 | £187,500 | £36,092 |
| £1,000,000 | £40,000 | £250,000 | £43,752 |
| £1,250,000 | £50,000 | £268,275 | £49,752 |
| £1,500,000 | £60,000 | £268,275 | £55,752 |
| £2,000,000 | £80,000 | £268,275 | £67,752 |
Net column: 4% drawdown plus the full new state pension (£11,973, 2025/26), income tax per 2025/26 rUK bands (frozen to 2028), no NI on pension income. Annuity context: best single-life level rate at 65 is 7.86% per Retirement Line's July 2026 tables.
Drawdown, annuity, or both?
Drawdown keeps the pot invested and flexible: the 4% guideline is the standard starting point, but you can flex withdrawals around markets and life. Annuities pay more per pound right now — rates are near multi-decade highs, around 7% at 65 for a single-life level product — but the income is fixed, and level annuities lose purchasing power every year. A common compromise covers fixed bills with an annuity and leaves the rest in drawdown.
Tax shapes both routes identically: pension income is taxed as ordinary income against the 2025/26 bands (personal allowance £12,570, higher rate from £50,270 — frozen to 2028) but pays no National Insurance, so retirees keep more of the same gross than workers do. The state pension is taxable too and consumes most of the personal allowance, which is why every page here shows the with-state-pension arithmetic separately.
Two ceilings to know: tax-free cash is capped at £268,275 (the Lump Sum Allowance), which bites on pots above £1,073,100; and from 6 April 2027 unused pension funds count as estate assets for inheritance tax (Finance Act 2026) — see our IHT by estate value pages. For how your pot compares with typical household wealth, the ONS-based net worth by age pages give the benchmarks.
Frequently asked questions
How much pension pot do I need to retire?
It depends on target spending. On the 4% guideline, each £100,000 of pot supports about £4,000 a year of pre-tax income. A £500,000 pot plus the full new state pension (£11,973 in 2025/26) delivers roughly £32,000 gross — close to the take-home pay of a median UK salary.
What is the 4% rule?
A planning guideline from US researcher William Bengen (1994): draw 4% of the pot in the first year, uprate with inflation, and a balanced portfolio has historically survived a 30-year retirement. It is a yardstick, not a guarantee — UK studies often suggest slightly lower rates for cautious portfolios.
Are annuity rates good right now?
Yes by historical standards — UK annuity rates in 2026 are near multi-decade highs. Retirement Line's July 2026 tables show a best single-life level rate at 65 of 7.86% (Aviva); Which? quotes around £7,000 a year per £100,000. Quotes are personalised.
How much of my pension is tax-free?
Usually 25%, capped at the £268,275 Lump Sum Allowance. The rest is taxed as income — with no National Insurance — against 2025/26 bands, frozen to 2028.
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