Spending your pension

How quickly can you spend your pension?

Life expectancy is one of the great unknowns – and a conundrum for millions of pension savers approaching retirement.  How should you budget to ensure your pension pot lasts as long as you do?

How long will I live?

The average life expectancy in England and Wales for a 65-year-old woman is just over 86, while a man can expect to live to almost 84, according to the Office for National Statistics.

How much can I spend in retirement?

The factors to consider are your likely annual expenditure and the size of your savings and pension pots, plus any other income.

While some costs are likely to fall, if you pay off your mortgage or no longer have to commute, others may increase, such as holidays and heating bills.

Do not forget care costs and funeral bills either.  While there is some means-tested help available, setting money aside in case you need to pay for long-term care is sensible if you can afford it.

Once you have drawn up a budget, assess your finances.  Certain pensions may become available at different times.  For example, you may wish to withdraw cash from a workplace scheme at the age of 60, but bear in mind that you will not receive your state pension until later – and don’t forget investment portfolios and Isa’s, or any debts that need to be paid.