Is a £400,000 pension pot enough? At 67, it could give you around £57,661.46 per year (including state pension)

Is a £400,000 pension pot enough?

Whether a £400,000 pension pot is sufficient depends primarily on what income you need in retirement, when you plan to retire and whether you receive a full State Pension. At age 67 with the full new State Pension of £11,502 per year, the private income needed to reach £30,000/year total is approximately £18,498 — equivalent to a £462,000 pot using the 4% rule. For £25,000 total income, the required pot is approximately £337,000.

Using the 4% drawdown rule, a £400,000 pot provides an annual private drawdown income of approximately £16,000. Combined with the full new State Pension (£11,502), total annual retirement income is approximately £27,502. These are pre-tax planning figures — drawdown income is taxed as income, though the personal allowance (£12,570 for 2025/26) means the first £12,570 of total income is tax-free.

The table above shows projections at different retirement ages because the number of years remaining for pot growth (using the 5% growth and 2.5% inflation assumptions) changes the real-terms value significantly. A pot of £400,000 currently held has 20000 per year of expected nominal growth at the 5% assumption, compounding across the years to retirement.

How to grow your pot

• Increase total monthly contribution — even £50/month more has a meaningful compounding effect over 20+ years.
• Review contribution rate after each pay rise (auto-enrolment minimum is 8% total; most advisers recommend higher).
• Use salary sacrifice where your employer offers it — this saves both Income Tax and employee NI on contributions.
• Keep growth and inflation assumptions realistic and review against actual fund performance annually.
• Check whether you have any old defined benefit pension entitlements from previous employers — these can materially change your income picture.

Tax on pension withdrawals

Pension withdrawals from a defined contribution pot are taxed as income. The first 25% of the pot can be taken as a tax-free pension commencement lump sum (PCLS), capped at £268,275. The remaining 75% is taxed at your marginal income tax rate as you draw it.

For planning purposes: if your only income in retirement is your drawdown and State Pension, you have a personal allowance of £12,570 before any income tax applies. At total income of £20,000/year, income tax would be approximately £1,486 (20% on £7,430 above the personal allowance). At £30,000/year, income tax would be approximately £3,486 (20% on £17,430). This means your net (after-tax) retirement income will be higher than the gross drawdown figure, particularly at lower income levels where the personal allowance covers a meaningful share of income.