There are many factors that affect an annuity quote. You will still be within the personal allowance. This would take your total annual income to £12,080, or £1,007 a month, including the state pension. That’s £123 a month, based on an annual 4% withdrawal. If you chose not to take the 25% lump sum, your annual income from your private pension would be £1,480. As this is within each individual’s personal allowance of £12,570, there would be no further tax to pay. Broken down over the year, it would be £976 a month. 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.Īdded to the full state pension of £10,600 a year, it means your total annual income would be £11,710. If you took the 25% tax-free cash as a lump sum, you would have £9,250 to spend or save or invest elsewhere. So what regular income could £37,000 give you? Pension drawdown 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. Get matched with an expert now What does a £37,000 pension pot give? It’s free to find an FCA-regulated financial adviser at .uk to help plan ahead. Read more: Best ready-made personal pensions After that 25% allowance, these withdrawals would be taxed, as would be the case if you bought an annuity with your pension savings. You could withdraw the whole lot as cash, choosing where you spend or save it. 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. 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. 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. 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. Through drawdown, you can withdraw some tax-free money directly from your pension, leaving the remainder invested in the same plan. You can take 25% of your total retirement savings tax-free. Read more: Best SIPP providers How do you take an income from a private pension?īefore 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. See our guide on how to choose a private pension to help find the right one for you. The full UK state pension is currently worth £10,600 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.Īssuming you qualify for the full government amount – £203.85 a week at present, or £10,600 a year – this means you need to find at least an extra £2,200 a year from your personal savings to fund retirement.Īdding to this, you can only gain access to your state pension when you reach the age of 66 (soon to be 67).Īs 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). Read more: ‘I retired at 52 with a tax-free income of £18,500 a year’ Will the state pension be enough?
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