Is a £1m pension pot enough for retirement?

Is a £1m pension pot enough for retirement?


  • Brewin Dolphin figures show how pension pot targets can be reached
  • Figures show how much you can spend and leave an inheritance to family


So you have dreams of retiring and living the life you are accustomed to with holidays, new clothes, trips out to the cinema, weekends away and long lunches with friends. But how much do you need in your pension pot to sustain the standard of living that you would like whilst also leaving an inheritance to your family?


According to figures from Brewin Dolphin, one of the UK’s leading wealth managers, a pension pot of £1m could provide a gross annual income of around £40,000 (4%) per year. Based on a projected growth rate of 5% a year, you would need to put aside £880 each month for 35 years to build up a pot of £1m for retirement. If you were to take £40,000 a year from the pot, which would be provided by a combination of interest and dividends, you could preserve the pension pot itself to leave to family when you die.


On the same basis, and assuming the same growth rate and timescale to retirement, you would need to set aside £660 a month for a fund of £750,000, which would provide an income of around £30,000 a year. You would need around £440 a month for a pension pot of £500,000 which could provide a gross annual income of around £20,000 a year. 


Brewin Dolphin says that to preserve the capital while providing income to live on, retirees should aim to take a maximum of 4% of the overall pension, subject to the individual’s risk profile. However, for people who do not wish to preserve the pension pot it is possible under flexi-access to take higher levels of income.


John Fletcher, financial planner at Brewin Dolphin, explains: “People have the option of taking the full 25% tax-free lump sum and then a taxable income from the remaining fund or they can take a combination of the tax-free cash – which can be phased over time – and taxable income. Under the flexi-access drawdown rules there is no limit on the amount people can withdraw but the length of the time the fund will last depends on the growth achieved.”


Take more income but eat into your capital


To illustrate how long a pension pot of £750,000 could last under flexi-access, if you were to take the full 25% tax-free lump sum of £187,500 at age 65 and an annual income of £39,000 then with an average growth rate of 5% the pension would last until you were 83 years old**.


The other main option is to use the pension to buy an annuity. Annuities provide a guaranteed income for life and are a traditional way of providing pension income in retirement. For example, a £375,000 annuity would provide a level income of £19,000*** a year for a single life. If you want an income that goes up with inflation (RPI) and which will continue to pay income to your spouse after you die, then the annuity income will be considerably less. A £375,000 annuity would provide you with an annual income of £8,021 per annum****.


John adds: “The key point about annuities is that income is guaranteed, whereas getting income from an investment portfolio is not guaranteed and the capital value and underlying income fluctuate with capital markets. However, given the changes to pension rules and the ability to pass a pension fund on to family after death, many clients with a reasonable size of pension fund now tend to opt for the drawdown approach rather than purchasing an annuity.”


Above all, says John, it is important to set aside as much money as you can afford, as soon as you can. He adds: “Essentially people need to save as much as they can to build a pension fund during their working lives. The sooner they start to save the better as the longer a pension fund is invested the longer it has to benefit from tax-efficient growth and compounding of returns. There are various online calculators* available that you can use to input the current level of saving, as well as future contributions and assumed growth rates to give you an idea of the fund you might have available in retirement.”




** According to ONS, 2017, life expectancy in the UK is 79.2 for men and 82.9 for women.


***AVIVA, Iress, Compulsory Purchase Annuity 6 2019


****JUST, Iress, 6 2019




  • The value of investments can fall and you may get back less than you invested
  • The opinions expressed in this document are not necessarily the views held throughout Brewin Dolphin Ltd.
  • Past performance is not a guide to future performance
  • We or a connected person may have positions in or options on the securities mentioned herein or may buy, sell or offer to make a purchase or sale of such securities from time to time. In addition we reserve the right to act as principal or agent with regard to the sale or purchase of any security mentioned in this document. For further information, please refer to our conflicts policy which is available on request or can be accessed via our website at
  • This information is for illustrative purposes only and is not intended as investment advice.
  • No investment is suitable in all cases and if you have any doubts as to an investment’s suitability then you should contact us.
  • If you invest in currencies other than their own, fluctuations in currency value will mean that the value of their investment will move independently of the underlying asset.
  • Any tax advantages mentioned are based on personal circumstances and current legislation which are subject to change.
  • Brewin Dolphin is authorised and regulated by the FCA




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