How much income could your pension pot give you?

The short answer: In 2026/27, a £100,000 pension pot could buy a guaranteed income of roughly £5,000 to £6,000 a year, or about £420 to £500 a month, before tax. That's if you swap it all for an annuity at a 5% to 6% rate. Most people can take up to 25% tax-free first, and the State Pension comes on top.

How do you turn a pension pot into an income?

You choose how to take the money out, and that choice shapes how much you get each year. If you have a defined contribution pension (a pot built from what you and any employer paid in), MoneyHelper sets out the main options:

• Buy an annuity: swap some or all of your pot for a guaranteed income, for life or a fixed number of years.

• Use drawdown: leave the money invested and take income or lump sums when you want.

• Take lump sums: take money as and when you need it, with 25% of each lump sum tax-free.

• Take the whole pot in one go: 25% is tax-free and the rest is taxed as income, so you might pay more tax because it all lands in one tax year.

You can mix them. MoneyHelper's example is taking a tax-free lump sum at 60, using drawdown for a few years, then turning what's left into a guaranteed income at 65.

The earliest you can usually take money from a private pension is 55, rising to 57 from April 2028. GOV.UK adds that the exact age depends on your scheme's rules.

Capital at risk. The value of your pension can go down as well as up, and you may get back less than you pay in.

Whichever route you pick, GOV.UK says you can usually take up to 25% of any pension as a tax-free lump sum. MoneyHelper says the total tax-free cash from all your pensions is capped by the lump sum allowance, which is £268,275 for most people. The more you take as cash now, the less you have left to give you an income later.

Tax treatment depends on the individual circumstances of each client and may be subject to change in future.

How much will a £100,000 pension pay per month?

If you used the whole £100,000 to buy an annuity, you'd get roughly £420 to £510 a month before tax. The exact figure depends on the annuity rate you're offered on the day.

MoneyHelper's annuity guide gives a simple example: on a £100,000 pot, a 5% rate gives £5,000 a year and a 6% rate gives £6,000 a year. For a recent real-world figure, Quilter's June 2026 research assumed a 6.1% rate for a 66-year-old buying an annuity that rises each year.

Here's what those rates look like for different pot sizes:

These are illustrations, not quotes. They assume you use the whole pot for an annuity, take no tax-free cash, and they show income before tax. Monthly figures are rounded.

For context, Pensions UK's Retirement Living Standards put a moderate retirement at about £32,700 a year for one person. So a £100,000 annuity on its own covers a fairly small slice of that, and your State Pension and any other savings would need to do the rest. Our guide to how much you need to retire comfortably has the full picture.

Your own rate could be higher or lower. MoneyHelper says it depends on:

1. how much you convert

2. whether it pays for life or a fixed term

3. whether the income rises each year

4. your age, health and where you plan to live

5. interest rates and other market factors at the time

Health can make a real difference. MoneyHelper says you might be offered more if you have a condition like diabetes or high blood pressure, or if you smoke. This is called an enhanced annuity, and it's one of the few times a doctor's note might boost your income.

Annuity or drawdown: what's the difference?

An annuity gives you certainty. Drawdown gives you flexibility. The trade-off is that with drawdown, you carry the risk of the money running out.

Based on MoneyHelper's guides to annuities and drawdown.

With an annuity, you also choose whether the income stays the same or rises. MoneyHelper's example: after 10 years, a £200 monthly level annuity still pays £200, while one rising by 3% a year pays around £261. A level annuity starts higher, but a rising one keeps better pace with prices.

With drawdown, MoneyHelper warns your money might not last if you live longer than you expect, take too much in the early years, or don't adjust when your investments grow less than planned. On the plus side, you can spread withdrawals across tax years, so a big withdrawal doesn't push you into a higher tax band.

One rule catches people out. MoneyHelper says that once you take taxable money from drawdown, the most you can pay into pensions with tax relief drops from £60,000 to £10,000 a year. This is the money purchase annual allowance. A lifetime annuity doesn't trigger it, but a fixed-term annuity does.

How much tax will you pay on your pension income?

Pension income is taxed like wages once your total income is over your Personal Allowance. GOV.UK says that allowance is usually £12,570. The tax-free 25% doesn't count.

For 2026/27, the Income Tax bands outside Scotland are:

• up to £12,570: 0%

• £12,571 to £50,270: 20%

• £50,271 to £125,140: 40%

• over £125,140: 45%

Your State Pension counts towards this too. The full new State Pension is £241.30 a week, which is about £12,548 a year. That uses up almost all of your Personal Allowance on its own. From April 2027 it's due to rise by 3.9%, the government confirmed on 28 October 2026, taking the full amount to £13,036.40 a year (about £250.70 a week). That's a little more than the £12,570 Personal Allowance. GOV.UK explains that most pension providers take tax off through PAYE before they pay you, while the State Pension is paid without tax taken off.

What is the new Pension Tax Allowance?

The government plans a new Pension Tax Allowance for the three tax years from 6 April 2027 to 5 April 2030. GOV.UK's explainer says that if you've reached State Pension age and your total income is no more than the full new State Pension (£13,036.40 in 2027/28), you won't pay Income Tax on it. Above that, the allowance shrinks by £1 for every £3 of extra income and runs out once your income reaches £13,319. It's worth up to £94 a year and is applied automatically, so there's nothing to claim. The government says it will legislate for it in Finance Bill 2026-27, so it isn't law yet.

It looks at all your income, not just the State Pension. With a full State Pension, about £283 a year of other income is enough to reach £13,319. So if you have a private pension paying an income on top, you probably won't get it. In the example below, the £6,100 annuity takes total income well past that.

Tax treatment depends on the individual circumstances of each client and may be subject to change in future.

Example: a £100,000 annuity plus the State Pension

These are round, made-up figures using 2026/27 rates to show the maths.

• Annuity income: £6,100 a year (6.1% of £100,000)

• Full new State Pension: £12,548 a year

• Total income: £18,648

• Taxable above the £12,570 allowance: £6,078

• Income Tax at 20%: about £1,216

• Left after tax: about £17,432 a year, or roughly £1,453 a month

Can I retire at 60 with £500k in the UK?

It can work, but it depends on what you spend and how long the money needs to last. MoneyHelper notes that retirement often lasts more than 20 years.

A useful yardstick is the Retirement Living Standards. For one person, they put a minimum lifestyle at £13,900 a year, moderate at £32,700 and comfortable at £45,400. These are spending figures, not income, and they assume you own your home outright. We go through them in more detail in our guide to how much you need to retire comfortably.

The big thing to plan for at 60 is the gap before your State Pension starts. Your State Pension age is the earliest you can get it, so your own pot has to do all the work until then.

Example: £500,000 at 60, worked through

Again, these are made-up round numbers, not a plan.

1. Take 25% tax-free: £125,000. That's within the £268,275 lump sum allowance.

2. Leave £375,000 in drawdown.

3. Take £30,000 a year as taxable income. Tax at 20% on the amount over £12,570 is about £3,486, leaving roughly £26,514.

4. If the pot grew by nothing at all, £30,000 a year would use up £375,000 in 12 and a half years.

Investment growth could stretch that, and poor returns could shorten it. Once the State Pension starts, you could take less from your pot. The tax-free £125,000 is extra, to spend or keep as a buffer.

Can I retire at 55 with £200k?

It's possible, but £200,000 has to stretch a long way if you stop work at 55. It's also worth checking when you can actually start: MoneyHelper's self-employed pensions guide says the minimum age is 55, rising to 57 after April 2028.

Here's a rough sketch with made-up numbers. Take £50,000 tax-free and leave £150,000 in drawdown. Taking £15,000 a year would empty it in 10 years if it grew by nothing. Tax on £15,000 would be about £486. Whether that's enough depends on how far you are from your State Pension age.

The same guide says most schemes are designed to pay out after 65, because you usually get more if you wait. Annuities work that way too: MoneyHelper says the rate you're offered depends partly on your age, so buying younger usually means a lower income.

Is £100k in a pension at 40 good?

It's a solid start, and you still have plenty of years for it to grow. Whether it's "enough" depends on what you'll pay in from here, how it's invested and the life you want later.

MoneyHelper's free pension calculator gives a feel for it. Its published assumptions are 5% investment growth a year, 0.75% a year in charges and 2.5% a year for inflation. You can try different growth and payment levels in our flexible pension calculator.

Don't forget the State Pension. MoneyHelper says you usually need 35 qualifying years of National Insurance for the full amount and 10 years to get anything. You can check your State Pension forecast online, and our guide to the UK State Pension explains how it all works.

How much pension should I pay if I'm self-employed?

Everyone's situation is different, so we can't say what's right for you. What we can do is explain the rules, so you can work out a figure that fits your income.

The self-employed have no employer paying in, so your pot depends on what you put in yourself. MoneyHelper says the State Pension on its own is unlikely to give you enough for a comfortable retirement.

The rules that matter most:

• Tax relief is available on payments up to 100% of your annual earnings.

• With relief at source, your provider claims 20% from the government. MoneyHelper says a £100 payment costs a basic-rate taxpayer £80.

• The annual allowance is £60,000 this tax year.

Our guide to how pension tax relief works when you're self-employed goes through the maths.

Still got questions?

Do I have to buy an annuity? No. MoneyHelper says you can choose drawdown, lump sums, the whole pot at once, or a mix.

Is annuity income taxed? Yes. MoneyHelper says annuity income counts towards your Income Tax, and the provider usually takes tax off using your tax code.

Can I have more than one type of income? Yes. If you have more than one pension, MoneyHelper says you can do different things with each one.

What will a £300,000 pension pot pay? As an illustration, a 5% to 6.1% annuity rate would give £15,000 to £18,300 a year before tax. Real quotes vary.

Where can I get free help? Pension Wise offers free, impartial appointments if you're 50 or over with a defined contribution pension. It doesn't matter how much your pot is worth.

Does the State Pension go up? Yes. The new State Pension rises each year by the highest of average wage growth, price inflation (CPI) or 2.5%. In April 2027 the full new State Pension goes up by 3.9%, in line with earnings.