Is a £250,000 pension pot enough to retire on?

Key takeaways

• A £250,000 pension pot, combined with the full State Pension, could provide an annual income that could cover a modest lifestyle but fall short of more comfortable living standards.
• Retirement age, lifestyle, health, and additional income sources (like ISA savings, investments, or rental income) play a crucial role in determining whether £250,000 is enough for your retirement needs.
• Starting early, increasing contributions, consolidating pension pots, and considering drawdown or annuity options are strategies to consider if looking to stretch your pension pot further.

So, you’ve reached the big £250,000 point! This is a significant milestone, so congratulations — you’ve worked hard, invested consistently, and are now looking towards the future.

But a big question may still be on your mind: will this amount fund the retirement you’re hoping for?
For many, a £250,000 pension pot provides a solid foundation. But being realistic, you could say this may not be enough for a luxurious retirement.

Ultimately, it’ll come down to your lifestyle and outgoings. However, if you have additional income sources to top this up, such as the State Pension or other savings, it may feel like a more comfortable amount.

In this article, we’ll explore whether a £250,000 pension pot is enough to retire on. We’ll break down how far this amount could stretch, explore the impact of lifestyle, other income sources, and provide practical tips to enhance your retirement planning.

Jump to:

• The quick answer
• Understanding the State Pension
• What are my withdrawal options?
• Can you retire comfortably on £250,000?
• Factors that determine if £250,000 is enough for you
• Retirement scenarios: what £250,000 looks like in practice
• How much should your pension pot be?
• What if £250,000 won’t be enough?
• Summary

The quick answer? It depends on your circumstances!

There’s no one-size-fits-all answer when it comes to whether £250,000 is enough for retirement. The amount you’ll need depends on a variety of factors, including:

• Your retirement age
• Lifestyle
• Your living situation
• Whether you’re retiring as a single person or as part of a couple
• Essential outgoings
• And whether you have other income streams
  

While £250,000 is substantial, it’s worth evaluating how it aligns with your specific retirement goals.

Understanding the State Pension

The State Pension is a key source of income for most retirees in the UK. Here’s what you need to know:

• The full new State Pension is currently £11,973 per year (as of 2025/26 rates, but rising to £12,547.60 in 2026/27). This applies to those who reached State Pension age after April 6, 2016. However, as Rachel Reeves announced in the Autumn Budget, pensioners will receive a 4.8% rise from April 2026, taking the full amount to £12,547.60 a year.
• To qualify for the full amount, you’ll need 35 years of National Insurance (NI) contributions or equivalent credits.
• If you’re eligible for the older basic State Pension, the maximum annual amount is £9,175.40 (£176.45 per week).
• The State Pension age is dependent on your date of birth, you can check your retirement age and forecast for your State Pension here: gov.uk/check-state-pension.
  

If you have gaps in your National Insurance record, you may be able to make voluntary National Insurance contributions to boost your entitlement. Additionally, thanks to the triple lock policy, the State Pension increases annually by whichever of the following is highest:

• Inflation (based on the Consumer Price Index),
• The average earnings growth of the UK,
• or 2.5%.

What are my withdrawal options?

When you reach retirement, there are a number of ways you can take your pension, such as Pension Commencement Lump Sum (25% tax-free withdrawal at retirement age), or a mix of taking this and then a regular income thereafter (known as flexi-Access drawdown).

Whichever option you decide is right for you, you may want to consider seeking some independent financial advice before getting started. Especially as there are common strategies like ‘drawdown rules’ you may want to take into consideration first.

4% drawdown: conservative approach

This conservative approach could be for those who want to try to ensure their savings last throughout their retirement. Opting to withdraw just 4% of your pension pot each year could be an option.

Using the 4% drawdown rule as a guide, you could expect to see an annual income of approximately £10,000 per year with a £250,000 workplace or personal pension pot, before tax.

Although this is a conservative example. This percentage would differ depending on how much you wanted to withdraw. And remember that you may be able to top this amount up with a State Pension or alternative income if/when you have access to those.

5-6% drawdown: moderate approach

A 5-6% drawdown rate could provide an income of £12,500-£15,000 per year from a £250,000 pot. However, this approach carries a slightly higher risk of depleting your pot over time.

These figures are separate to the State Pension or any other income you may have, which can be added to this. However, it’s important to note that both these figures are before tax.

Factoring in your State Pension too

If eligible to receive it, this amount could be topped up by the full State Pension (currently £11,973 per year as of 2025/26 rates, but this is set to rise to £12,547.60 in the 2026/27 tax year), meaning your total annual income could range between £21,973 and £23,973 depending on the drawdown percentage you would opt for.

Annuity: guaranteed income

If you don’t like the idea of not knowing exactly how much you could get (remembering, pensions are investing your money until you need to withdraw it), you could choose to purchase an annuity plan instead.

This would convert your pension pot into a guaranteed income for life. However, the amount you receive will depend on the policy on offer and could be affected by factors such as your age and health. (Your tax treatment will depend on your individual circumstances, and it may be subject to change in the future.)

It’s important to consider the tax implications of your withdrawals, as it’s typically only the first 25% withdrawn that is tax-free; the remainder would be subject to income tax.

Can you retire comfortably on £250,000?

The PLSA’s Retirement Living Standards provide a useful benchmark for retirement income:

*Assuming your living costs are covered. Care, rent, remaining mortgage payments, etc., could affect this too.

While these options may cover a minimum to modest lifestyle, it does fall short of the PLSA’s Retirement Living Standards, which estimates that a single person would need £31,700 per year for ‘moderate’ outgoings. It’s worth factoring in your living situation and how that affects your outgoings, particularly as the PLSA’s guidelines presume you’d have paid off a mortgage by retirement age.

Don’t forget, these example figures would only apply to a workplace/private pension, not the State Pension. You can factor this in when you reach State Pension retirement age, if you’re eligible, and add additional income sources to top this up.

Factors that determine if £250,000 is enough for you

Several factors would influence whether a £250,000 pension pot will be enough for your retirement:

• Retirement age:
  • Choosing to retire at 55 versus 67 can significantly impact how long your pot lasts.
• Lifestyle and living costs:
  • Your spending habits, location, and whether you have debts, all matter.
• Health and life expectancy:
  • Longer retirements require larger pots.
• Other income sources:
  • Consider ISAs, rental income, or your partner’s pension.
• Living alone or as a couple:
  • Shared expenses can stretch your retirement funds further.
    

Retirement scenarios: What £250,000 looks like in practice

Wealthify doesn’t offer financial advice, but we’ve put together some examples for you to understand how your circumstances could affect your retirement fund. Here’s how £250,000 might look in different retirement scenarios based on the PLSA’s estimated outgoings:

Scenario 1: Single, retiring at 67, mortgage-free

With a £250,000 pot and eligibility to receive the full State Pension, this individual could comfortably cover a minimum lifestyle and save for unexpected expenses.

Withdrawing £10,000 per year, adding their new State Pension amount of £11,973 = £21,905 a year.

PLSA states £21,600 a year being the estimated needed for a single person’s minimum outgoings.

Scenario 2: Couple, retiring at 65, both with £250k pots

If you both had a £250,000 pot each, your combined £500,000 and two full State Pensions could support a moderate lifestyle if following the drawing down of 4% each year.

Withdrawing £9,977 from each individual’s pension pot, adding their individual new State Pension amount of £11,973 each year = £21,905 each/per year.

PLSA stating £43,900 per annum being the estimated amount a couple would need for moderate outgoings.

Scenario 3: Retiring early at 55

Retiring earlier requires using savings to bridge the gap until you reach State Pension age. A £250,000 pot may be stretched thin in this scenario unless you have alternative income.

How much should your pension pot be?

To calculate your ideal pension pot:

1. Estimate your desired annual retirement income.
2. Subtract the State Pension if you’re eligible to receive it (£11,973 per annum).
3. Multiply the remaining amount by 25.
   

For example, if you will need £30,000 a year and the State Pension covers £11,973 of that, your private pension pot should be (£30,000 - £11,973) x 25 = £450,675.

This formula assumes a conservative 4% drawdown rate.

Benchmarks based on age can also help you evaluate your progress. You could aim to have:

• 1x your annual salary by age 30
• 3x your annual salary by age 40
• 6x your annual salary by age 50
• 8x your annual salary by age 60
  

If you’re behind these benchmarks, don’t panic — there are still steps you can take to boost your savings, as we’ll explore next.

What if £250,000 won’t be enough?

If you’re concerned that £250,000 won’t be enough for your retirement, there are steps you could think about taking to improve your financial situation, no matter how close you are to retirement:

If you’re 10+ years from retirement:

• Consider increasing your pension contributions, taking advantage of the tax relief offered to you.
• Think about consolidating any old or lost pensions, as this is a strategy people make that could save them from paying fees for multiple pots, and improve visibility of your overall pension.
• You could maximise your employer contributions and check whether they offer any salary sacrifice policies that could benefit you (your HR or Payroll team should be able to advise you further).
• Consider opening a SIPP (Self-Invested Personal Pension) to explore a wider range of investments and styles.

If you’re 5–10 years from retirement:

• You could try to boost contributions where possible.
• Think about delaying your workplace retirement date to allow more time for your investments to grow.
• See if reducing your current costs could free up more income, which could then be put towards your pension instead.

If you’re close to retirement:

• You could consider delaying taking your pension to allow it to grow further.
• Check your State Pension eligibility, and remember see what options you have to meet the required NI contributions or relevant credits.
• Consider a phased retirement, working part-time while drawing down smaller amounts from your pension.

Additionally, track down any lost pensions using a pension finding service or the forthcoming government Pensions Dashboard. Consolidating small, underperforming pots into a single, well-performing pension plan could also make a significant difference.

Summary

A £250,000 pension pot is a significant milestone, but whether it’s enough to retire on will really depend on your individual circumstances.

For many people, it would fund a minimum-to-modest lifestyle when combined with the State Pension, but it may fall short of moderate-to-comfortable living standards.

Key lessons:

• At a 4% drawdown rate, a £250,000 pot provides £10,000 per year before tax.
• Combining this with the full new State Pension would bring your total annual income to approximately £21,973 per year.
• Personal factors such as your retirement age, lifestyle, and health will significantly impact how far your pot stretches.
• How the remainder of your pot’s investments perform in your retirement years will impact the amount you can withdraw.
• Fees have an impact too; don’t forget this amount would be deducted by the provider from your pension pot. This is a reason why many people choose to consolidate smaller or forgotten pension pots.

The earlier you start planning and boosting your pension, the better your chances of achieving the lifestyle you want in retirement. Use tools like our pension calculator to estimate how much you need and explore options to consolidate or grow your savings.

If you’re unsure where to start, consider speaking to a financial adviser to create a plan tailored to your needs and goals.

Your tax treatment will depend on your individual circumstances, and it may be subject to change in the future.

With investing, your capital is at risk, so the value of your investments can go down as well as up, which means you could get back less than you initially invested.

Wealthify does not provide advice. If you’re not sure whether investing is right for you, please speak to a financial adviser.