What might a savings pot of £100,000 get me as a retirement income?

This topic contains 1 reply, has 2 voices, and was last updated by Holly Mackay Holly Mackay 5 months, 2 weeks ago.

Pensions  |  Retirement  |  Investments
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Aboodi

What might a savings pot of £100,000 get me as a retirement income?

This is not full-fat regulated capital 'A' advice - that costs.And you need to see a financial adviser for that. But hopefully this is some useful food for thought.
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Holly Mackay

“Lots of people we speak to don’t know how much their current savings will actually get them as an annual income once they retire. As a very very crude rule of thumb, we divide the total you have by 20 to get an estimation. So if you have £100,000 saved, you might use £5,000 a year of pension income as a guide.

To get a more specific answer tailored to your circumstances, use this tool from the Money Advice Service.

This is based on you buying what we call an ‘annuity’. This is trading in your lump sum for a fixed annual income until you gasp your last. Your other option is what we call ‘draw down’ – to stay invested in the markets, so you still have ‘skin in the game’, and to withdraw money from this pot as it (hopefully) grows cos stock markets go up over time. So the idea is that you might take out £5,000 a year BUT the £100,000 investment pot might go up by about 4-5% a year.

You should also take into account your state pension entitlement. The rules have changed recently and this has a particularly significant impact on women in their early 60s today. This calculator will tell you at what age you will be eligible for the State Pension. Loads of us grew up with the idea stuck in our heads that this was 60. Well that’s not true anymore. For most in their 40s today, it is more likely to be 67.

As a rough guide here, think about how many years you have paid National Insurance for/how long you have worked. Multiply every year by £4.44 and that will give you your weekly State Pension estimate. 20 years all in? That’s about £90 a week. Or another £4,600 a year.

So all in, if you have £100,000 saved and you have worked for 20 years, you can expect an annual retirement income of just under £10,000 a year – rough guide only!

This Retirement Income guide from us will help you walk through your numbers. Good luck!”

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David started Mansion House Capital with his (now) wife back in 2000. They advise across all areas of finance and mainly look after London-based professionals who are too busy and/or too bored (!) to prioritise…full bio

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