How to ensure that your pension lasts 20 years – and pay less taxes

Longer life expectancy, higher living costs and falling annuity rates mean that careful planning is needed to ensure that even significant retirement pots last.

A single retiree According to the Pensions and Lifetime Savings Association, he needs an average of £ 10,200 a year to live a “minimum standard” lifestyle at retirement. To achieve a “moderate” standard of living, a retiree will need an average of £ 20,200 each year.

In fact, most savers are far from achieving this level of retirement income. According to the Profile Pensions advisory service, the average pension is £ 61,897 after lifelong savings.

Meanwhile, the average saver has a target pension of £ 355,000, according to Scottish Widows.

Even if this target level is reached, some careful planning is required to last for two decades without the taxpayer eating a large chunk.

Annuity or drawing – what is best?

Traditionally, those who would like to secure a secure income upon retirement would buy an annuity, but these schemes have become more popular. Rates have fallen to such a level that most buyers are unlikely to receive even the initial investment back.

Meanwhile, “extraction” taking money from a pension pot, has become popular. This option offers much greater flexibility, but does not provide a guaranteed income for life.

According to Aviva, a 655-year-old non-smoker and non-drinker could be bought an annuity for £ 355,000, which pays £ 16,489 a year.