The State Pension forms the building block of most people’s retirement income, but you’ll need to have access to additional income if you want a comfortable standard of living. 

If you’ve a defined contribution pension, you have a wide range of options when it comes to how you create this income. You could, for example, buy an annuity, which is a financial product that guarantees you an income for life in retirement. Alternatively, you may choose a flexible drawdown plan, which enables you to draw an income from your pot when needed while leaving your savings invested. Find out more in our guide Your pension options at retirement. 

In this article, we explain how your State Pension affects how much income you need from your workplace and/or personal pension, and where you can get further help.

If you’re considering getting professional financial advice, Unbiased is offering Rest Less members a free pension review. It’s a chance to have a qualified independent financial advisor (IFA) take a look at your pension arrangements and give an unbiased assessment of your retirement savings.

The review is free and without obligation, but if the IFA feels you’d benefit from paid financial advice, they’ll go over how that works and the charges involved.

How much State Pension are you entitled to?

The full State Pension is currently £10,600 a year in the 2023/24 tax year – or £203.85 a week – but you may receive a different amount based on your National Insurance record. At present, both men and women born after 5 October 1954 will receive their State Pension at age 66. The State Pension age is set to rise in the coming years, to age 67 between 2026 and 2028, and to 68 between 2037 and 2039. Find out more below, and in our guide How the State Pension works. 

Helen Morrissey, head of retirement analysis at Hargreaves Lansdown, said: “We should prepare to receive the State Pension later than planned. We’ve seen State Pension age rise in recent years and we cannot rule out this timetable being accelerated further in the coming years. This means if you are still some way away from retirement you should be mindful of the fact your state pension age could be later than it currently is now.”

Under current rules, you’ll only be entitled to the maximum State Pension if you’ve made 35 ‘qualifying years’ of National Insurance Contributions (NICs). You may receive more than this if you’re entitled to the Additional State Pension (also known as the State Second Pension, or SERPs) under the old scheme, which is essentially a top-up to the State Pension. Find out more in our guide State Second Pension and SERPS explained

The State Pension rises every year in line with the triple lock guarantee, which is either in line with inflation, wage growth or 2.5%, whichever is greater. Despite inflation running particularly high recently, seeing some big increases in the state pension recently, the annual increase is, on average, about 2.5%. Read more in our article What is the pension triple lock?

Getting a State Pension forecast

The simplest way to find out how much you can expect to receive from your State Pension is to get a forecast online. Go to the government’s Check your State Pension forecast site to request your statement. You can read more about how to get a State Pension forecast and what this will tell you in our guide How can I get a State Pension forecast? 

If you discover you’re not on track to receive the full State Pension, you may be able to pay voluntary NICs to plug gaps in your record. Read more about these and whether they are worth paying in our guide Is it worth paying to top up your State Pension?

Managing your retirement income

In addition to the State Pension, you’ll need to decide how to turn any workplace or private pension savings into an income at retirement. Annuities have become increasingly popular as rates have climbed in recent months. You buy an annuity from an insurance company with your pension savings in return for handing over some, or all of your pension savings. You’ll usually be paid a guaranteed income for life, or a fixed term, from an annuity. However, the major disadvantage of an annuity is that this income will usually die with you, so cannot be passed onto loved ones, unlike your pension. Find out more in our guide Annuities Explained

If you decide to use drawdown to manage your retirement income, you’ll leave your pension invested and take an income as and when you need it. The idea is that, hopefully, over the long term, you’ll continue to benefit from any growth in the value of your investments, whilst also receiving an income. Whether you choose an annuity or drawdown, or a combination of the two, you’ll usually be able to take 25% of your pot tax-free either as a lump sum, or spread across a number of years. 

Your drawdown pot isn’t guaranteed to last for life, unlike income from a lifetime annuity (or a defined benefit pension/final salary scheme). The value of your pension will rise and fall depending on the performance of your underlying investments. This makes it difficult to know how much you can take from your pension without running out of money during retirement. 

But whatever you choose to do with your pension at retirement, it’s important to factor in the State Pension as the foundation of your income. Becky O’Connor, director of public affairs at PensionBee, said: “A lot of people forget to factor in their State Pension. For most of us, this is worth a lot. If you converted the £10,600 State Pension back into a rough equivalent private pension pot, you could pay for it with a pension worth around £190,000, at current annuity rates.

“So working out what you need and factoring your State Pension can actually be a relief – you don’t need as much as you perhaps initially thought. However, not many online calculators factor in your State Pension when telling you how much income you will have in retirement – they can only go on how much income is in your private pension.”

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How much income do you need?

Pension experts have calculated how much income you might need each year in retirement, based on your lifestyle. If you want a ‘moderate’ retirement, for example, that includes a few holidays in Europe each year, you’ll need an income of £23,300 a year after tax as a single person, according to the Pensions and Lifetime Savings Association’s (PLSA) latest Retirement Living Standards research. This rises to £34,000 for a couple. 

If you want a ‘comfortable retirement’, which includes three holidays in Europe each year, this increases to £37,300 a year for a single person, or £54,500 for a couple. Of course, these are only rough examples of how much you’d need in retirement, and you’ll need to carefully consider your own income needs. Read more in our article Can you afford to retire?

Buying an annuity: how much you need in your pension for ‘moderate’ and ‘comfortable’ retirement

Amount needed according to the PLSA

Annual State Pension income (currently)

Extra annual income on top of State Pension 

Approx pension pot at age 67 that could achieve this (after 25% lump sum taken) 

£23,300 – single moderate




£34,000 – couple moderate




£37,300 – single comfortable




£54,500 – couple comfortable




Source: PensionBee

Annuity rate of £6,845 per £100,000 assumed.

Example based on flexible drawdown

Emma, 66, is single and she’s targeting a ‘moderate’ standard of living in retirement, which means she needs around £23,300 in income a year after tax from her pension.

Let’s assume she will take that income from a flexible pension drawdown plan, and retire at State Pension age, and that she’s building a retirement plan to last 30 years. She’s already taken her 25% tax-free cash, so all of her income is taxable. 

Based on 2023/24 income tax rates, she’ll need a taxable income of £25,983 per year, according to calculations by investment provider AJ Bell. If she receives the full £10,600 from the State Pension, the amount of income taken via drawdown from your pension would need to provide the remaining £15,383.

Assuming that her income needs to rise by 2% each year and her investments return 4% growth each year, she needs a pension worth around £355,000 to deliver that income for 30 years.

This is substantially more than the amount you’d need in your pension to buy an annuity that provides the same income. However, Tom Selby, head of retirement policy at AJBell, said: “That’s only part of the story though. If this person bought an annuity and then died then their beneficiaries would get nothing, whereas someone in drawdown could potentially pass on their remaining pot to beneficiaries. 

“You also have to consider the value of flexibility. An annuity pays a set income for life, which provides security but is inflexible. Some people might prefer to shift their annual income depending on their circumstances. They might want to spend a bit more in the early years of retirement, for example (although of course they’d need to consider sustainability when doing this).

“However, annuity rates are much higher than they have been in recent years, and for lots of people a combination of the security of an annuity and the flexibility of drawdown will provide the right blend in retirement.”

What if you want to retire early?

If you wish to retire before you receive your State Pension, you would also need a lot more in your pension pot to make up your income. Of course, many people simply cannot afford to retire before State Pension age because they don’t have enough in savings. 

The earliest age you can access your defined contribution pension pot is currently 55 (rising to 57 in 2028), though few of us can afford to fully retire at that stage of life. This age is set to remain at around 10 years below the State Pension age, so it may increase in the future in line with this age. If you want to retire at 55 and have a comfortable retirement, you’d need much more in your pot than if you wait until you reach the government’s State Pension age. 

Morrissey said: “If you want to retire in your late 50s and you aren’t due to get your State Pension until your late 60s then your drawdown pot will need to supply the extra income for those extra years. The full £10,600 State Pension is a large extra amount to take from your drawdown pot so you will need to plan carefully to make sure you don’t put your income under strain long-term. 

“Taking large drawdowns, particularly in the early part of your retirement can deplete your overall pot, particularly if investment markets are challenging and leave you having to make tough decisions about your spending later on. A natural yield approach – where you take the income generated by your investments – can work as it means you won’t deplete your capital. Keeping a cash reserve of one to three years’ worth of essential expenses should be able to help you supplement your income in years when returns are lower.”

Gradually drawing from your pension could help you to supplement your earnings, meeting any shortfalls, while carefully managing your tax allowances so you don’t pay more tax than necessary. Read more in our guide How can I phase my retirement? You may, for example, decide to take just enough from your pension to stay within the basic-rate tax bracket. But how and when you choose to take your pension will depend on your personal circumstances.

Where to go for pension help

Financial advice can be particularly valuable when you come to turn your pension pot into an income in retirement, as it can be difficult working out just how much you need, in addition to your State Pension entitlement. 

You can get more information on your State Pension, how this works and how to claim it from the Pension Service. If you’re not sure whether you’re saving enough to supplement your State Pension in retirement, or you want more help, you might want to speak to an independent financial advisor who can recommend the best course of action based on your individual circumstances. You can find a local financial advisor on VouchedFor* or Unbiased*, or for more information, check out our guides on How to find the right financial advisor for you or How to get advice on your pension.

If you’re considering getting professional financial advice, Unbiased is offering Rest Less members a free pension review. It’s a chance to have a qualified independent financial advisor (IFA) take a look at your pension arrangements and give an unbiased assessment of your retirement savings.

The review is free and without obligation, but if the IFA feels you’d benefit from paid financial advice, they’ll go over how that works and the charges involved.

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