Concerned about outliving your pension in retirement?
Analysis shows how withdrawal rates, investment growth, and planning choices affect the longevity of your savings
As retirement incomes become increasingly dependent on defined contribution pensions, the question of how to ensure savings last a lifetime has become more important than ever. With no guaranteed payout, individuals must decide how much to withdraw and how to invest, making sustainability a key issue for long-term security.
Recent analysis shows that a £100,000 pension pot could provide income for life or run out in just 13 years, depending on the level of withdrawals and the returns achieved[1]. Understanding this balance is crucial for maintaining financial stability in later life, helping retirees to align spending, risk, and investment strategies with the longevity of their savings.
How withdrawal rates shape outcomes
The data shows two common withdrawal scenarios: taking £4,000 or £8,000 annually from a £100,000 pension fund. These represent 4% and 8% withdrawal rates, both of which are often seen in retirement drawdown patterns.
The results show that, after ten years, someone withdrawing £4,000 annually could have between £70,400 and £141,000 remaining, depending on whether their investments grew by 8%, 5%, or 2% each year. For those withdrawing £8,000 annually, the remaining balance ranged from £83,900 to £27,800.
These differences show how quickly withdrawals and investment growth can build up over time. In high-growth environments, smaller withdrawals help a pension stay sustainable, whereas larger withdrawals during poor returns risk running out of savings much sooner.
How long can a pension last?
When modelling over a full retirement period, the outcomes vary significantly. Withdrawing £4,000 annually allowed the pension to last a lifetime if annual investment returns reached 5% or higher. Even in a lower-return scenario of 2%, the fund could still last 29 years. Conversely, with an annual withdrawal of £8,000, the pension’s longevity ranged from 28 years in a high-growth scenario to just 13 years in a low-growth scenario.
These findings indicate that the risk of longevity, or the likelihood of outliving one’s savings, increases substantially when income withdrawals exceed sustainable levels. The issue is exacerbated by inflation, which gradually erodes purchasing power, and by fluctuating market performance that affects drawdown plans year after year.
Why this matters for retirees
Recent regulatory data show that between 1 January 2025 and 31 March 2025, £5.0 billion of taxable payments were flexibly withdrawn from pensions by 672,000 individuals through 1.6 million payments. The average taxable withdrawal per person was £7,400 during this period. There was a 24% rise in the value of payments withdrawn in this quarter compared to the same quarter in 2024[2].
Retirement flexibility enables individuals to adapt their income to suit their lifestyle, but it also demands careful planning and ongoing review. Selecting sustainable withdrawal rates and preserving exposure to long-term investment growth are essential steps to prevent shortfalls.
Balancing certainty and flexibility
For many, combining different income sources can provide a practical solution. Covering essential living costs with a guaranteed income, such as the state pension or an annuity, offers stability and peace of mind. The remaining pension can then be invested in a drawdown to encourage growth and fund discretionary expenditure.
Emerging policy proposals are anticipated to formalise these kinds of “blended” retirement income solutions, combining predictability with flexibility. By aligning secure income with essential needs and allowing investment growth to support longer-term objectives, retirees can minimise the risk of outliving their pension while keeping control over how they access their funds.
Planning for longevity
The uncertainty of lifespan, inflation, and market performance makes it hard to determine the exact amount to withdraw each year. Regular reviews, adaptable plans, and seeking professional advice can assist retirees in adjusting their income as their financial situation changes. The aim is not only to protect capital but also to sustain purchasing power and confidence during later life.
Concerned about ensuring your pension endures?
Ultimately, the key to avoiding shortfalls lies in maintaining a balance, drawing enough to enjoy retirement today while ensuring your savings last into the future. To learn more, contact us; we can help you assess sustainable withdrawal strategies, explore blended income options, and plan for financial security throughout retirement.
THIS ARTICLE DOES NOT CONSTITUTE TAX, LEGAL OR FINANCIAL ADVICE AND SHOULD NOT BE RELIED UPON AS SUCH. TAX TREATMENT DEPENDS ON THE INDIVIDUAL CIRCUMSTANCES OF EACH CLIENT AND MAY BE SUBJECT TO CHANGE IN THE FUTURE. FOR GUIDANCE, SEEK PROFESSIONAL ADVICE. A PENSION IS A LONG-TERM INVESTMENT NOT NORMALLY ACCESSIBLE UNTIL AGE 55 (57 FROM APRIL 2028 UNLESS THE PLAN HAS A PROTECTED PENSION AGE). THE VALUE OF YOUR INVESTMENTS (AND ANY INCOME FROM THEM) CAN GO DOWN AS WELL AS UP, WHICH WOULD HAVE AN IMPACT ON THE LEVEL OF PENSION BENEFITS AVAILABLE.
Source data:
[1] UK Pension Longevity and Withdrawal Rate Analysis 2025: https://www.standardlife.co.uk/about/press-releases/how-to-avoid-outliving-your-pension-in-retirement
Author: Adam Reeves
DipPFS Cert CII (MP&ER)
Independent Financial Planner, Wealth Manager, Director
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