Making your retirement income last


MoneyPlus Features Team

15th April 2019 at 3:29pm

The challenge: how to help protect and grow your pension savings when taking an income in your retirement.

When you’re saving into your pension, your goal is probably relatively simple: pay in as much as possible to have the best possible chance of enjoying the lifestyle you want in the future.

When it comes to taking money from your pension, it can be more complicated. You have choices when it comes to how you take your pension savings, normally from the age of 55, although this age may change in the future.

If you’re in a modern flexible pension, your options include taking a flexible income (you may also see this called income drawdown), taking out some or all of your pension savings as a lump sum, or setting up a guaranteed income for life (an annuity). With all of these options, you can usually take up to 25% as tax-free cash.

If you take a flexible income, the money left in your pension after you’ve taken your tax-free cash remains invested. And how it’s invested could help your savings last as long as you need them to.

That’s why the investment decisions you make matter. Here are three things to think about when considering where to invest your remaining pension savings.

1 Inflation and living longer mean you need growth

With your pension savings staying invested if you take a flexible income, this helps give them a better chance to grow than if they were simply in a bank or building society account.

Growth is important as we’re generally living longer, with potentially 20-30 years of life after work. Even a 2% average rate of inflation can cut the spending power of your pension savings by almost a third over 20 years.

2 When you take your money matters

Taking a flexible income often involves taking out fixed amounts at regular intervals – a bit like paying yourself a salary.

But if you do this when markets are falling, that amount becomes a larger proportion of your overall pension savings. Think about it like taking the same size slice from a smaller pie. Once you’ve taken it out, you’ll have less money invested to recover losses if and when markets (and your investments) rise again, and your money may not last as long as you need it to.

3 Market performance can affect how long your pension savings will last

Research suggests that the return you make on your investments in the first few years after starting to take money from your pension could have the biggest impact on how long it will last.

So, if the value of your pension falls in the early years, it’s harder for investment growth to make up these losses.

It’s all about balance: help protect and grow

It makes sense to get to know your pension and plan your retirement income with these three considerations in mind.

Think about having a mix of investments that can help protect the income you need in the short term, while also giving the growth that can help your pension savings last for as long as you need them to.

You can find out more about this in our guide to choosing investment options in retirement.

If you have an adviser, talk it over with them. If you don’t, you can find one at There’s normally a charge for financial advice.


Your pension’s invested to help it to grow.  That means its value can go down as well as up and it may be worth less than you paid in. Investment returns aren’t guaranteed. 

The information here is based on our understanding in April 2019 and should not be regarded as financial advice.