How to make your pension last
Retiring from work completely is a huge milestone that brings a brand-new sense of freedom. But shifting from a mindset of building wealth to spending it requires a practical change in strategy. When your regular salary stops, the priority shifts to making sure your accumulated savings look after you for the long term.
Whether you’re looking to secure a comfortable lifestyle or simply want to understand your future choices, here’s how to review your strategy and protect your retirement wealth.
Setting your baseline: The UK Retirement Living Standards
Before you can build a sustainable withdrawal strategy, you need an objective idea of how much life actually costs today. A helpful framework to use is the UK Retirement Living Standards, which are updated annually by Pensions UK to serve as a budgeting guide.
The standards outline three distinct levels of spending for households outside London:
Minimum lifestyle: This covers your essential needs with a small amount left over for social activities – like a week-long holiday in the UK, eating out once a month, and affordable leisure time. A single person currently needs £13,900 a year, while a couple needs £22,500.
Moderate lifestyle: This provides greater financial security and flexibility, allowing for a two-week all-inclusive holiday in Europe, a takeaway once a week, regular meals out, and a small car. One person needs £32,700 a year, and a couple needs £45,400.
Comfortable lifestyle: This allows for more financial freedom, spontaneity, and treats. It factors in regularly replacing a small car, up to three UK weekend breaks, a two-week Mediterranean holiday with more spending money, and regular gifts for family members. One person needs £45,400 a year, while a couple needs £62,700.
Important note: These living standards assume you have paid off your mortgage and own your home outright. If you expect to pay rent or continue handling housing costs in retirement, you will need to add those expenses on top of these figures.
Building your strategy: Annuity vs. drawdown vs. cash lump sums
Once you have an idea of the lifestyle you want to maintain in retirement, you can consider three primary ways to withdraw money from your pension:
1. The fixed income path: Annuities
An annuity is a financial product you purchase using some or all of your pension cash in exchange for a guaranteed income.
Advantages: It offers certainty. You know exactly what you’re getting each month, removing the stress of market volatility, and, with a lifetime annuity, you can never outlive your money.
Considerations: Once you buy an annuity, the decision is final. Not all annuities protect your money against inflation.
2. The flexible income path: Drawdown
Pension drawdown allows you to take a flexible income from your retirement savings while leaving the rest of your pot invested in the market.
Advantages: You retain total control. You can alter your payouts whenever your lifestyle changes, keep your funds invested giving them the potential to continue growing, and leave any remaining wealth to your loved ones.
Considerations: Your invested money would be vulnerable to market volatility and withdrawing too much, too soon could cause your pot to run out early.
3. The cash path: Lump sums
You can pull cash lump sums directly from your pension as needed. Usually, the first 25% of your total pension value can be taken completely tax-free, and you’ll pay Income Tax when you withdraw any of the remaining 75%. However, taking larger taxable lump sums in a single tax year could mean paying a higher rate of Income Tax.
Combining options to make your pension last
You don't have to choose just one rigid path. Many retirees opt for a hybrid approach designed to deliver both stability and flexibility:
Using an annuity for your essential baseline
You could choose to use a portion of your pension pot to buy an annuity that matches your absolute ‘minimum’ living standards. This ensures your council tax, utility bills, and food are entirely covered by a guaranteed income stream.
Drawing flexibly from investments for your comfort
You could then leave the remaining balance of your retirement savings invested with a flexible drawdown provider. You could make ad-hoc withdrawals from this portion of your wealth to fund big-ticket items like holidays, home renovations, and leisure spending. Because this money stays invested, it has the opportunity to continue growing and protect you from inflation over time, giving your money a better chance of lasting throughout your later years.
The State Pension: Your supplementary foundation
When you’re mapping out how to make your money last, remember that your personal savings don't have to carry the load alone.
The UK State Pension pays a regular income directly to you once you reach eligible age. Currently the State Pension age is 66, rising to 67 by 2028. While it is rarely enough to fund your entire cost-of-living at retirement by itself, it acts as a great supplement to your personal pension savings.
The easy, low-fee, award-winning Personal Pension from Moneybox. It's the smart way to build a retirement full of possibility.
Shaping a strategy that lasts requires total visibility over your retirement wealth. If you have various pension pots scattered across different past employers, keeping track of your total value, performance, and fees can become incredibly difficult.
With the Moneybox Personal Pension, you can fund and combine your old pension pots into one easy, low-fee Moneybox Personal Pension in just a few taps using our free provider search tool.
It’s easier than ever to get started and offers:
One of the lowest platform fees in the UK* – service fee capped at £150 a year when invested in Moneybox Funds, no matter the size of your pension.
Expertly created Moneybox funds managed by Amundi, the largest European asset manager.
Legacy planning. Nominate your pension beneficiaries to ensure your loved ones are looked after.
*Moneybox, Pension fees comparison, as of 26/05/2026
As with all investing, your capital is at risk. The value of your pension can go up and down, and you may get back less than you invest. Tax treatment depends on individual circumstances and may be subject to change in the future. You can only access your pension once you reach the minimum pension age.
When deciding whether to transfer your pension, it’s important to compare the charges, investment options & benefits between Moneybox and your existing provider. If you’re not sure whether transferring is right for you, we recommend you speak with an independent financial advisor.
Taking benefits from your pension is a significant financial decision. We strongly recommend seeking free guidance from Pension Wise or advice from a financial adviser before making a choice.
There are a number of ways to withdraw from your pension at retirement, but not all of these options are currently offered by the Moneybox Pension. When weighing up your retirement choices, it is important to consider the specific benefits, risks, and charges associated with each method. You should compare products offered by other providers on the open market, as they may offer features or lower costs that are more suitable for your individual needs.