£700,000 pension pot: how much income does it actually give you?

£700,000 draws 4.5% in the first year retiring at 50 and 5.4% retiring at 60 — either side of the 4% rule rather than far from it. This is the pot size at which conventional withdrawal-rate reasoning starts to apply properly, because the pot is genuinely being asked to last rather than to bridge.

Worth knowing what the 4% rule leaves out: it takes no account of the State Pension, which on this plan supplies 43–59% of income from 67. Applied literally to a UK pot it is therefore conservative — you can draw harder in the bridge years precisely because a second income starts later.

£700,000 crosses from a ‘minimum’ to a ‘moderate’ standard of living at age 53, measured against the Retirement Living Standards.

8 of the 11 retirement ages on this page clear it — most of the range, but not the earliest years. £700,000 is therefore a genuine choice rather than a foregone conclusion: retiring at 53 or later buys a ‘moderate’ standard, and stopping before that buys ‘minimum’ plus several extra years of retirement.

That is the most interesting trade on this page, and it is genuinely personal — more years at a lower standard against fewer at a higher one. Nothing in the arithmetic settles it for you, which is exactly why it is worth modelling against your own spending rather than a national average.

Across the ages on this page, £700,000 pays between £166,000 and £250,000 in income tax over the whole plan, and some years cross into the higher-rate band. That is not a rounding error against the pot itself, and unlike growth it is substantially within your control.

Three levers move it. A quarter of each pension withdrawal is tax-free, so the order you draw wrappers in changes the bill; the years before the State Pension starts have an unused personal allowance in them that is gone if you do not use it; and once the State Pension arrives it absorbs most of that allowance permanently, so income deferred into those years is taxed harder than income taken before them. Our calculator prices all three against your actual numbers.

On the optimised plan the SIPP inside £700,000 is emptied by age 59 — 9 years of retiring at 50 — and the ISA grows to £558,397 over the same period. The pot is not running out: the money is moving wrapper to wrapper, and the reason is tax.

In the years before the State Pension starts you have a personal allowance and a basic-rate band doing nothing. Drawing the pension down then — faster than you need to spend it, and re-sheltering the surplus in an ISA — uses that allowance while it is free. Leave the money in the SIPP instead and it is still taxable later, except that by then the State Pension has absorbed the allowance and every pound is taxed from the first. At £700,000 the SIPP is too large to move in one or two years without pushing into a higher band, so the plan spreads it over 9 — which is why the retirement age and the conversion window interact.

This is the single biggest lever the calculator finds that a spreadsheet usually misses, and it is worth £84,000 or so across the age range on a pot this size.

Going from £700,000 to £800,000 adds about £3,500 a year retiring at 50, and £3,900 a year retiring at 60. Put the other way, that extra £100,000 pays itself back as income over roughly 25 years of retirement.

Compare that with what the same effort buys through the retirement age instead: one more year of work is worth about £600 a year on this pot. On those numbers the extra saving is the stronger lever, which is unusual and specific to this pot size. See £800,000 in full →

The difference between retiring at 50 and at 60 on the same £700,000 is about £6,200 a year, or £600 per year waited. Part of that is simply funding 10 fewer years; the rest is tax, and at this pot size the tax part is the larger share.

The bridge years carry an unused personal allowance and a 25% tax-free entitlement on each withdrawal, so income taken then is cheap. Once the State Pension starts it fills the allowance on its own and further pension income is taxable from the first pound. Waiting therefore buys a shorter retirement funded more efficiently — a real gain, but a smaller one than the headline spread suggests.