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Find out what size pension the average retiree needs to fund a comfortable retirement, with tips on how to generate income.
24 November 2025 | 3 minute read
If you’re approaching retirement, one of the biggest questions you’re likely to have is, “Have I saved enough?”
There’s no golden rule for how much money you’ll need in retirement, as much will depend on when you retire, what you plan to do in retirement, and how long you live. However, having a rough idea of how much income the average retiree needs, and how to generate it, is a good place to start.
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Research by the Pensions and Lifetime Savings Association suggests that to fund a ‘comfortable’ retirement, the average single person would need £43,900 a year and the average couple would need £60,600 a year (after tax)1.
According to our own research, a 66-year-old retiring with a £1m pension who opts for income drawdown could draw a gross income of up to £60,600 a year until age 86. This assumes annual investment growth of 5% after fees and that the income increases annually with 2% inflation. The same 66-year-old could draw around £50,000 a year until age 95.
If their pension pot was worth £500,000, the corresponding figures would be £31,500 a year and £25,000 a year, respectively.
An individual who buys an annuity at age 66 could expect gross retirement income of around £63,000 gross annual retirement income from a £1m pension fund or up to £31,000 a year from a £500,000 pension fund2.
Annuity income is guaranteed for life, so you would receive the same annual income regardless of how long you live for. With income drawdown, the value of your pension pot could go down as well as up, and there’s a risk you’ll run out of money if you live longer than you plan for. Bear in mind that income drawdown enables you to vary your income to suit your lifestyle, whereas annuity income is fixed.
It’s also possible to take a ‘mix-and-match’ approach, for example buying an annuity to generate income for essential expenditure and using income drawdown for discretionary spending.
It’s worth bearing in mind that income in retirement can come from other sources, not just your pension. So, if your pension pot isn’t as big as it needs to be, you might be able to supplement your income with other savings and investments.
ISAs, for example, can be a valuable source of retirement income. Although ISAs don’t benefit from tax relief on contributions, withdrawals are completely free from tax. This means ISAs can provide a substantial tax-efficient income that can allow you to leave your pension fund untouched in your first years of retirement, potentially giving it longer to grow.
Under the current rules, ISAs form part of your estate when calculating your inheritance tax (IHT) bill, whereas pensions fall outside your estate, so can be passed onto loved ones free of IHT. However, the chancellor announced in the 2024 Autumn Budget that unused pension and death benefits will be considered part of a person’s estate for IHT purposes from 2027. This may affect how you wish to plan for retirement or passing on your wealth to loved ones, so you may wish to speak to a wealth manager or tax adviser.
Other income sources to consider include cash savings accounts, shares, bonds and property income, as well as the state pension, which is £230.25 per week for those who qualify for the full rate.
Determining how much money you need to save for retirement is no easy feat. A wealth manager will help you decide whether your pot is big enough, explain how to make up a shortfall, and advise on the most suitable way of accessing your pension, based on your individual circumstances.
Taking some financial advice will help you feel confident you’re on track for a more secure financial future, so you can concentrate on enjoying life today. Let our ideas help you plan for the future with confidence.
Find out more from our dedicated support team by calling us on 020 7246 1111. Opening hours are Monday to Friday 9am to 5pm.
1 https://www.retirementlivingstandards.org.uk/ 2Annuity assumptions: single life, monthly in advance, no guarantee period, 2% indexation, non-smoker, standard (healthy) rates, payable for life. Quotes obtained from Iress on 27 October 2025.
The value of investments, and any income from them, can fall and you may get back less than you invested. This does not constitute tax or legal advice. Tax treatment depends on the individual circumstances of each client and may be subject to change in the future. You should always check the tax implications with an accountant or tax specialist. Neither simulated nor actual past performance are reliable indicators of future performance. Information is provided only as an example and is not a recommendation to pursue a particular strategy. Information contained in this document is believed to be reliable and accurate, but without further investigation cannot be warranted as to accuracy or completeness. Forecasts are not a reliable indicator of future performance.
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This publication has been issued by RBC’s Wealth Management international division in the United Kingdom and the Channel Islands which is comprised of an international network of RBC® companies located in these jurisdictions and includes RBC Europe Limited and Royal Bank of Canada (Channel Islands) Limited. You should carefully read any risk warnings or regulatory disclosures in this publication or in any other literature accompanying this publication or transmitted to you by RBC’s Wealth Management international division.
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