**How much you need in your pension pot for a comfortable retirement depends on your lifestyle aspirations and factors such as outstanding debt.**

But there are ways to estimate how much would count as a good pension pot for you and your lifestyle and how far your private pension will stretch.

Below, we give some examples of the typical annual income generated by different-sized pension pots. These are intended as a rough guide and have been compiled with the help of Lisa Tipton, director of financial planning at New World.

- Will the state pension be enough?
- How do you take an income from a private pension?
- What income does a £37,000 pension pot give?
- What income could £150,000 give?
- What regular income could a £500,000 pension pot give?

**Will the state pension be enough?**

The full UK state pension is currently worth nearly £10,000 a year, but a single pensioner needs an annual retirement income of £12,800 – at least – in order to fund a basic lifestyle, says the Pensions and Lifetime Savings Association.

Assuming you qualify for the full government amount – £185.15 a week at present, or £9,628 a year – this means you need to find at least an extra £3,200 a year from your personal savings to fund retirement.

Adding to this, you can only gain access to your state pension when you reach the age of 66 (soon to be 67).

As a result, most people opt for a private pension, from which you can usually start releasing cash at the age of 55 (rising to 57 by 2028). We take a look at these options below.

See our guide on how to choose a private pension to help find the right one for you.

**How do you take an income from a ****private ****pension?**

Before thinking about how much income you will get from your private and workplace pension pots, first you need to know the different ways of taking money out of your pension.

You can take 25% of your total retirement savings tax-free.

**1. Pension drawdown**

Through drawdown, you can withdraw some tax-free money directly from your pension, leaving the remainder invested in the same plan.

The long-established rule is to avoid taking out more than 4% a year, so your funds last as long as you might need them.

**2. Annuity**

Money in your pension can be exchanged for an annuity – a financial product which pays you a fixed income for the rest of your life.

**3. A combination of the two**

You could release some of the money as cash, perhaps up to that 25% tax-free limit, and buy an annuity with some all of the remaining funds.

This could work if you are at the stage where you would prefer a guaranteed income to risking your money by leaving it invested in the stock markets.

**4. Cash lump sum**

You could withdraw the whole lot as cash, choosing where you spend or save it. After that 25% allowance, these withdrawals would be taxed, as would be the case if you bought an annuity with your pension savings.

**What does a £37,000 pension pot give?**

The average pension savings for people aged 55 up to the state pension age is almost £37,000, according to the latest figures from the Office for National Statistics.

So what regular income could £37,000 give you?

**Pension drawdown**

If you took the 25% tax-free cash as a lump sum, you would have £9,250 to spend or save or invest elsewhere. You would then be left with £27,750.

Your estimated annual income would then be £1,110 a year or £92.50 a month before tax, assuming you retired at age 66 (when the state pension age kicks in) and you chose to withdraw 4% a year.

Added to the full state pension of £9,628 a year, it means your total annual income would be £10,738. Broken down over the year, it would be £895 a month. As this is within each individual’s personal allowance of £12,570, there would be no further tax to pay.

If you chose not to take the 25% lump sum, your annual income from your private pension would be £1,480. That’s £123 a month, based on an annual 4% withdrawal.

This would take your total annual income to £11,108, or £926 a month, including the state pension. You will still be within the personal allowance.

**Annuity**

There are many factors that affect an annuity quote. Using the annuity calculator from Money Helper, and with that same £37,000 pension pot, you could get a monthly income of about £102, or an annual income of £1,227, with an annuity.

This is after taking the 25% tax-free lump sum, and assumes you start the annuity at age 66, are single and want an inflation-linked policy whose value increases each year line with the retail price index (RPI).

**In a nutshell:**

**Lump sum:**£37,000**Drawdown monthly income after 25% tax-free withdrawal:**£92.50**Annuity monthly income after 25% tax-free withdrawal:**£102

*Assuming you withdraw 4% a year and retire at 66.

Pension pot size | Monthly income if taking tax-free 25% lump sum upfront | Monthly income including 25% tax-free allowance | Monthly income from annuity |

£37,000 | £92.50 | £123 | £102 |

**What income could £150,000 pension pot give?**

If you had £150,000 in the pot, let’s take a look at how much you’d get at retirement.

**Pension drawdown**

If taking the 25% tax-free cash as a lump sum, you would then be left with a pension pot worth £112,500.

Your estimated annual income would therefore be £4,500 a year or £375 a month before tax, assuming you retired at age 66 and withdrew 4% a year.

Added to the full state pension of £9,628 a year, it means your total annual income would be £14,128, or £1,177 a month.

However, as your income would be above the personal allowance of £12,570, you would be subject to basic-rate income tax of 20% on the difference: £1,558. After that tax deduction, the income you would expect to receive is £13,816 (£1,151 a month).

If you chose not to take the 25% tax-free lump sum, your total annual income from your private pension would be £6,000, or £500 a month.

This would take your total annual income to £15,628 (£1,302 a month) including the state pension.

As some of your payment would be tax-free, your annual net income would be £15,316, or £1,276 a month.

**Annuity**

With a £150,000 pot, you could get a monthly income of about £446 or an annual income of £5,363 with an annuity, the online annuity calculator from Money Helper suggests.

This is after taking the 25% tax-free lump sum, and assumes you start at age 66, are single and want the value to increase with RPI each year.

**In a nutshell:**

**Lump sum:**£150,000**Drawdown monthly income after 25% tax-free withdrawal:**£375**Annuity monthly income after 25% tax-free withdrawal:**£446

*Assuming you withdraw 4% a year and retire at 66.

Pension pot size | Monthly income if taking tax-free 25% lump sum upfront | Monthly income including 25% tax-free allowance | Monthly income from annuity |

£150,000 | £375 | £500 | £446 |

**What regular income could a £500,000 pension pot give?**

Half a million pounds feels like a lot to have invested, but how far will it actually get you?

**Pension drawdown**

If you took the 25% tax-free cash as a lump sum, you would have £125,000 to spend or save or invest elsewhere and be left with £375,000.

Your estimated annual income would therefore be £15,000 a year or £1,250 a month before tax. That’s providing you retire at age 66 and withdraw 4% a year.

Added to the full state pension of £9,628 a year, it means your total annual income would be £24,628, or £2,052 a month. Again, as your earnings are above the personal allowance, you would be subject to basic-rate income tax. The net income you could expect is £22,216 a year (£1,851 a month).

If you choose not to take the 25% tax-free lump sum, your total annual income from your private pension would be £20,000, or £1,667 a month.

Adding in the state pension, this would take your total annual income to £29,628 (or £2,469 a month) and your net income to £27,216 (or £2,268).

**Annuity**

You could get a monthly income of about £1,445 or an annual income of £17,347 with an annuity, according to the online annuity calculator from Money Helper.

This is after taking the 25% tax-free lump sum, and assumes you start at age 66, are single and want the value to increase with RPI each year.

**In a nutshell:**

**Lump sum:**£500,000**Drawdown monthly income after 25% tax-free withdrawal:**£1,250**Annuity monthly income after 25% tax-free withdrawal:**£1,445

*Assuming you withdraw 4% a year and retire at 66.

Pension pot size | Monthly income if taking tax-free 25% lump sum upfront | Monthly income including 25% tax-free allowance | Monthly income from annuity |

£500,000 | £1,250 | £1,667 | £1,445 |