How Long Will My Pension Pot Last? UK Drawdown Guide

The Average Return Is Not What Empties a Pot

A pension pot in drawdownflexi-access drawdown: Leaving your pension pot invested after you start taking money from it, drawing an income directly rather than buying an annuity. The pot can keep growing - or run out. Nothing is guaranteed. stays invested while you spend it, so its lifespan turns on three numbers you can see - the pot, the withdrawal, the average return - and one you cannot: the order the returns arrive in. Two retirements can share every visible number and still end fourteen years apart. This guide covers the two things the standard advice never connects: why the first few years carry most of the risk, and why the April 2027 inheritance-tax change pushes people to draw hardest at exactly the wrong moment.

Same Average, Same Withdrawals: One Pot Dies at Year 16

Sequence-of-returns risksequence-of-returns risk: The risk that the order of investment returns, not their average, decides the outcome once you are withdrawing. Early losses force you to sell more units at low prices to raise the same cash, and those units are gone when markets recover. is plain arithmetic. When you draw a fixed £15,000 from a pot that has just fallen, you sell more units at low prices to raise the same cash. Those units are gone when the recovery comes, so the loss is locked in. An average does not care what order its years arrive in - but your pot does.

The two paths share one set of thirty yearly returns averaging 5%, simply reordered: the bad patch falls first for one retiree, last for the other. The bad-order pot is empty at year 16; the good-order pot climbs before its bad years arrive and still ends above £200,000.

This is not a quirk of our model. Of the simulated all-equity retirements in Morningstar's UK modelling that ran out of money, nearly two thirds had lost value by the end of year five - nearly half by the end of year one. A retiree who cleared the first five years with gains had roughly a one-in-22 chance of later depletion. The first years are close to decisive.

The standard defences work on this mechanism. One to three years of planned spending held in cash means a bad year's income is not raised by selling cheap units; guardrail rules - taking less after a down year - do the same job from the other side. Neither changes your average return; both change which prices you sell at.

The Safe Rates You See Quoted Are Not Pension Numbers

Search this question and you will meet a safe withdrawal ratesafe withdrawal rate (SWR): The share of a portfolio you draw in year one of retirement, uprated with inflation, that research suggests survives a full retirement. The 4% rule is US data; UK estimates run from 3.1% to 4.1%, and none of them models a pension pot.. The most-cited current UK figure is Morningstar's 2026 UK study: a 4.1% starting withdrawal, uprated with inflation, survives 30 years in 90% of its simulations - on a portfolio of 30% equities and 70% bonds and cash, with 2.15% assumed inflation. Its flexible-strategy variant lifts that to 5.7%; an all-equity portfolio supports only 3.4%.

Almost no page quoting that number mentions what the study itself states plainly: it "relates solely to investment-portfolio withdrawals". It does not model pension pots - no income tax on the way out, no tax-free cash, no minimum access age - and it leaves the State Pension out entirely. The number you have been given describes a taxable portfolio belonging to someone with no pension at all.

The wider spread has the same character. Morningstar's US editions - the source of the widely repeated 3.9% and 3.7% - model a US retiree holding US assets. Wade Pfau's historical UK work gives a worst-case 3.77% under his perfect-foresight optimal portfolio, but 3.36% on a fixed 50/50 mix of shares and bills. Monevator's UK series finds 3.1% at best - needing an all-equity portfolio held through every crash - with balanced portfolios between 2.6% and 3.0%. Forward-looking models produce the high end, historical worst cases the low end, and none is a pension number.

That is why this site does not print a single UK safe rate. Still building the pot? Bridge sizing and wrapper order are covered in retiring before 57 - this page is about keeping the pot alive once you are spending it.

April 2027 Pushes You to Draw Exactly When It Hurts Most

From 6 April 2027, most unused pension funds and death benefits count in your estate for Inheritance TaxInheritance Tax: Tax on the estate of someone who has died, charged at 40% above the nil-rate band of £325,000, with an extra residence allowance available in some cases. - legislated in Finance Act 2026, detailed in HMRC's technical note. Our April 2027 pension IHT guide covers what is in and out of scope; this section is about what the deadline does to behaviour.

The old draw-order rule - spend the ISA and taxable accounts first, leave the pension for the family - existed because pensions sat outside the estate. That ends in April 2027, and practitioners are openly abandoning the rule. For many the arithmetic now points the other way: draw the pension while alive, spend or gift it, leave the ISA. There is no universal new order - it depends on estate size, your beneficiaries' tax rates and the spouse exemption - but notice what the incentive rewards: bigger pension withdrawals, earlier.

Set that against the chart above. The years when the deadline says "draw hard" are the first years of retirement - precisely when a bad run of returns does permanent damage. Nobody promoting either message connects them, and a tax-efficient death is a poor reason to run out of money while alive. Every pound drawn beyond your tax-free cash is also taxed as income in the year you take it. Model the real take-home with the Pension Lump Sum Tax Calculator, and expect emergency taxA temporary Month-1 tax code a provider applies to a first pension withdrawal before HMRC issues a proper code. It annualises the payment and usually over-taxes it; you reclaim the excess. to over-collect on a first flexible withdrawal - the emergency tax guide walks through the reclaim.

"Taxed Twice at 67%"? What the Relief Actually Does

The claim doing the rounds is that a pension inherited after April 2027 is "taxed twice", with 60% to 67% gone. The truthful version is narrower. The technical note confirms the offset the viral posts miss: the portion of a death benefit corresponding to the Inheritance Tax already paid does not count towards the beneficiary's taxable income - the same pounds are never taxed twice, and Income Tax falls only on what remains after IHT. The worst combined outcome needs a member who died at 75 or over, an additional-rate beneficiary and no exemption in play; a spouse inheriting is normally exempt from IHT, death benefits where the member died before 75 are normally free of Income Tax, and a basic-rate beneficiary keeps far more. Treat any single percentage as a headline, not your number.

"Take the Whole Lot at 55 - You Never Know How Long You Have"

It is the answer that keeps collecting upvotes under pension threads, so it deserves a straight response. Cashing out means three quarters of the pot is taxed as income in a single year - a lifetime of savings stacked into your highest-ever tax bands, with emergency tax over-collected on top. And the argument cuts both ways: you do not know you will die early either, and losing that gamble means being old and broke. Drawdown does not lock the door - you can raise the withdrawal any year you choose; cashing out makes the tax bill certain to avoid a risk that is only possible. From 2028 the earliest access age rises from 55 to 57 in any case.

The practical order: know the spread rather than one number; hold one to three years of spending in cash; decide in advance what a bad year does to your withdrawals; and make the April 2027 decision with both taxes on the table. The FIRE Calculator models the pot, the bridge and the wrapper order with your own numbers.

Sources: GOV.UK Inheritance Tax on pensions: technical note (Finance Act 2026); Morningstar, The State of Retirement Income UK 2026; Wade Pfau, Journal of Financial Planning 2010 and retirementresearcher.com 2012; Monevator, What is the UK safe withdrawal rate? 2025. Chart trajectories are our own illustrative model with disclosed assumptions, not a projection.