How Much Annuity Income Will I Get?

As you approach retirement, it’s important to start planning how much income you will be able to rely on in your later years. If you prefer the peace of mind of knowing exactly how much you will receive each month or year, you might opt to buy an annuity with your pension pot.

Pension annuities are a reliable way of securing a guaranteed income for the rest of your life. But how much annuity income might you be able to get with the savings you’ve built up during your working life?

In this article, we take a look at how much you might be able to get for different amounts, ranging from £75,000 up to £1,000,000. We’ve also highlighted how much annual income you might be able to rely on with pension drawdown too, to help you choose between annuity and drawdown.

What factors will affect how much annuity income you get?

The exact amount of pension income that you get with an annuity will depend on a number of individual factors. So while the figures in this article can be used as a rough guide, you’ll need to get a quote or speak to a pension advisor to get a true estimate. Factors affect that will affect your annuity income include:

• The size of your pension pot
• Your health and lifestyle
• The age at which you want to start drawing your pension
• Whether or not you take a tax-free lump sum payment
• Any extra annuity features you might want to opt for

We’ve made up some assumptions to provide the estimates below, which are to be used only for example purposes.

Annuity Assumptions

To provide the annuity estimates below, we’ve assumed that:

• You are taking out your pension at age 66
• You are in good health
• You are taking out a lifetime annuity, not a fixed-term annuity
• You are taking the full 25% tax-free cash sum from your pension pot
• You don’t opt for any optional extra annuity features or benefits

Drawdown Assumptions

To provide the drawdown estimates below, we’ve assumed that:

• You are taking out your pension at age 66
• You take your 25% tax-free cash from your pension pot.
• Your income will not increase
• No more money is paid into the plan
• An annual charge of 0.4%
• An annual rate of inflation of 2% each year
• Growth rates are 4.6%

How Much Annuity Will I Get for £75,000?

• Total pension pot = £75,000
• Tax Free Cash = £18,750
• Remaining Pension Pot = £56,250
• Annual annuity income estimate = £3,590
• Monthly annuity income estimate = £299

With a total amount of £75,000, if you take 25% tax free cash, you will be left with £56,250 remaining in your pot. With a lifetime annuity, you might expect to receive £3,590 a year, or £299 per month.

With pension drawdown, if you were to take an annual income of £4,000, this could last until around age 88.

How Much Annuity Will I Get for £100,000?

• Total pension pot = £100,000
• Tax Free Cash = £25,000
• Remaining Pension Pot = £75,000
• Annual annuity income estimate = £4,785
• Monthly annuity income estimate = £399

With a total amount of £100,000, if you take 25% tax free cash, you will be left with £75,000 remaining in your pot. With a lifetime annuity, you might expect to receive £4,785 a year, or £399 per month.

With pension drawdown, if you were to take an annual income of £5,000, this could last until around age 91.

How Much Annuity Will I Get for £150,000?

• Total pension pot = £150,000
• Tax Free Cash = £37,500
• Remaining Pension Pot = £112,500
• Annual annuity income estimate = £7,200
• Monthly annuity income estimate = £600

With a total amount of £150,000, if you take 25% tax free cash, you will be left with £112,500 remaining in your pot. With a lifetime annuity, you might expect to receive £7,200 a year, or £600 per month.

With pension drawdown, if you were to take an annual income of £5,000, your investment could last until age 93.

How Much Annuity Will I Get for £400,000?

• Total pension pot = £400,000
• Tax Free Cash = £100,000
• Remaining Pension Pot = £300,000
• Annual annuity income estimate = £19,240
• Monthly annuity income estimate = £1,603

With a total amount of £400,000, if you take 25% tax free cash, you will be left with £300,000 remaining in your pot. With a lifetime annuity, you might expect to receive £19,240 a year, or £1,603 per month.

With pension drawdown, if you were to take an annual income of £12,000, your investment could last until age 96.

How Much Annuity Will I Get for £500,000?

• Total pension pot = £500,000
• Tax Free Cash = £125,000
• Remaining Pension Pot = £375,000
• Annual annuity income estimate = £24,080
• Monthly annuity income estimate = £2,007

With a total amount of £500,000, if you take 25% tax free cash, you will be left with £375,000 remaining in your pot. With a lifetime annuity, you might expect to receive £24,080 a year, or £2,007 per month.

With pension drawdown, if you were to take an annual income of £15,000, your investment could last until age 96.

How Much Annuity Will I Get for £1,000,000?

• Total pension pot = £1,000,000
• Tax Free Cash = £250,000
• Remaining Pension Pot = £750,000
• Annual annuity income estimate = £48,050
• Monthly annuity income estimate = £4,004

With a total amount of £1,000,000, if you take 25% tax free cash, you will be left with £750,000 remaining in your pot. With a lifetime annuity, you might expect to receive £48,050 a year, or £4,004 per month.

With pension drawdown, if you were to take an annual income of £30,000, your investment could last until age 96.

Pension Annuity Advice

If you want to find out more about how much income you will get if you buy an annuity, or you want to explore your options further, book a free 30 minute call with one of our pension advisors to get started. We can assist you in understanding the process of buying an annuity and finding the most suitable options tailored to your unique circumstances.

Methodology

Figures were calculated using: https://www.legalandgeneral.com/retirement/pension-drawdown/pension-drawdown-calculator/

All annuity and drawdown income estimates shown above are before any tax is deducted.