A retirement income that lasts: Your simple guide to drawing sustainably from your pension

When you retire, you want to feel confident that your savings will sustain you for the rest of your life.

But even if you’ve grown your pension pot in line with your goals, there’s no guarantee the funds will last throughout your retirement.

Building a pension pot often involves extensive planning, with many people spending over 40 years working towards their goals. As you approach retirement, planning how you’ll draw down from your pension can be just as important as building it.

In fact, Pensions Age reports that half of over-55s are worried their retirement savings will not last their lifetime.

The sooner you start planning your retirement income, the better. Leave it too late, and you may find you’ve already overspent in early retirement – leaving your income short of your needs for later life.

Read on to explore how to turn your pension pot into a sustainable retirement income.

Budget for a long and comfortable life

As a standalone figure, your total retirement savings can feel like a huge amount. But when you consider that those savings could need to last 30 years or more, your pension pot may feel less substantial.

According to the Office for National Statistics, in 2024, the number of people aged 90 or over in the UK had risen by 53.7% in 20 years – meaning retirement savings must stretch further than ever.

Without comprehensive planning, you risk overspending early in your retirement and potentially running low on funds later in life.

A sustainable income doesn’t necessarily need to be consistent. For example, if you plan to travel more at the start of your retirement, you might choose to draw down more of your pension in the first few years.

To avoid overspending in early retirement, it’s often worth planning an income that:

• Assumes you’ll live to an old age
• Takes your evolving needs and goals throughout retirement into account.

Once you have defined an income for each stage of your retirement, you can create a budget to help you live within your means and ensure your pension lasts for the rest of your life.

Calculate your tax liability when planning your income

When planning an income, it’s important to remember that you may be charged Income Tax as you draw down from your pension.

Generally, you can take 25% of your pension fund tax-free, up to the Lump Sum Allowance of £268,275, as of 2026/27.

You can choose to take your tax-free lump sum as a single payment or as a series of smaller withdrawals.

The remaining 75% of your pension will usually be taxable once your annual earnings exceed the £12,570 Personal Allowance. A variety of income sources can count towards this threshold, including pension withdrawals and State Pension payments.

Your tax-free lump sum does not usually count towards your Personal Allowance.

As of April 2026, the full new State Pension is £12,547.60 a year – just £22.40 shy of the Personal Allowance. Therefore, in most cases, much of your personal pension income above the 25% tax-free portion will be subject to Income Tax.

Your tax rate is determined by your annual income. As such, drawing a higher income could see your pension subject to a higher rate of tax.

When planning your retirement income, it’s often wise to consider your tax liability. Without taking Income Tax into account, you may find your income doesn’t cover the lifestyle you had hoped for.

Consider keeping some funds invested

Drawing from your pension at a higher rate can not only mean a larger tax bill, but it can also limit your pot’s opportunity for further growth.

Until your funds are withdrawn, they typically remain invested within your pension pot. As such, they may have the opportunity to continue growing, depending on the investments’ performance.

By drawing only what you need, you could help make your income more sustainable by continuing to grow your pot during retirement.

Consider your other income sources

Your pension may not be your only source of income. It’s often worth considering all of your sources of income when planning the rate at which you draw down from your pension.

For example, you may also have income from:

• Employment, if you choose to work part-time as part of a phased retirement approach
• Interest on savings
• Returns on investments outside of your pension
• Property and rental income
• State Pension payments.

If you have a partner, it may be wise to plan your finances together to help ensure your income can sustain your ideal lifestyle throughout your retirement.

Remember, you cannot usually access your pension pot until the normal minimum pension age (NMPA), which is set to rise from 55 to 57 on 6 April 2028. Meanwhile, the State Pension Age is also rising from 66 and is set to reach 67 by April 2028.

If you’re planning to retire earlier, you may need to draw on alternative sources of income at the start of your retirement.

Weigh the pros and cons of annuities

If securing a guaranteed income is a priority for you, you may wish to consider annuities. These provide a regular income in exchange for some or all of your pension pot, or other savings and investments.

You can choose to receive an income for the rest of your lifetime or for a fixed term. Income can be paid at a consistent rate, or you can opt to have your income rise annually.

Your income rate is determined by a range of factors, from the value used to purchase the annuity to your age and lifestyle.

Annuities are not suitable for everyone. They offer limited flexibility, and you will not be able to reclaim your funds once you have purchased an annuity. So, if you were to pass away early in your retirement, a large portion of your pension may be lost.

That said, for some people, annuities offer peace of mind that they will receive a continuous income in retirement. If you’re considering purchasing an annuity, it’s often worth consulting a financial planner for support in choosing a suitable option for your needs before making any irreversible decisions.

Get in touch

Whether retirement is still a while away or just around the corner, we can support you in planning a retirement income that works for you. By taking the time to understand your retirement goals and priorities, we can create a tailored plan to help you draw a sustainable income throughout your retirement.

To find out more about how we can help you, get in touch.

• Marnel Stafford: email Marnel.Stafford@fosterdenovo.com or call 07305 970959
• Ryan Edwards: email Ryan.Edwards@fosterdenovo.com or call 07591 758136

Alternatively, you can call our office on 0207 469 2800.

Please note

This article is for general information only and does not constitute advice. The information is aimed at individuals only.

All information is correct at the time of writing and is subject to change in the future.

Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.

The Financial Conduct Authority does not regulate tax planning.

A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance.

The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts.

Your pension income could also be affected by the interest rates at the time you take your benefits. The tax implications of pension withdrawals will be based on your individual circumstances, tax legislation, and regulation, which are subject to change in the future.