Retirement is not a finish line. It’s the start of a new phase of financial planning, one that can last thirty years or more. The decisions you make about how you draw on your pension matter just as much as the decisions you made building it.
The data suggests most people aren’t treating it that way. According to the FCA, in 2024/25 fewer than one in three people accessing their pension for the first time took regulated financial advice. Research cited by FTAdviser found that many retirees will watch their pension run dry by their late seventies if they maintain their current withdrawal rate, leaving the average person with a nine-year shortfall. One in seven already regrets how much they’ve taken out.
Nine years is a long time to fund without a pension. It’s worth getting the withdrawal strategy right.
Why this got more complicated in 2015
Pension Freedoms, introduced in 2015, gave retirees far more choice over how to access their defined contribution pension. That flexibility is valuable. But it also transferred the responsibility. You are now in charge of making your pension last for the rest of your life.
Here are six things that should shape how you approach it.
1. Plan for a longer life than you expect
That probably sounds obvious. Plan for a long life. Of course. But the FCA data shows fewer than one in three people getting financial advice when they first access their pension. The obvious thing and the common thing are not the same thing.
The average 65-year-old woman has a life expectancy of 88. For men, it’s 85. But averages hide the range. One in four 65-year-old women will reach 95. One in four men will reach 92. If you plan only to the average, you’re planning to run out of money before a quarter of people your age do.
Build your withdrawal strategy around the longer end of the range, not the middle.
2. Take inflation seriously
An annual retirement income of £30,000 in 2015 needed to have grown to more than £41,000 by the end of 2025 just to maintain the same spending power. That’s a decade. Retirements can span two or three.
Failing to account for inflation in your withdrawal plan doesn’t just reduce your comfort. It can accelerate the point at which your pension runs out.
3. Know what income you can rely on
The State Pension provides a guaranteed income for life once you reach State Pension Age. Some people also use part of their pension to purchase an annuity, which pays a fixed income regardless of how long you live or what markets do.
Knowing what’s guaranteed gives you a foundation to build from. It tells you how much of your lifestyle your pension drawdown needs to cover, and how much room you have to move.
4. Build a drawdown strategy, then stick to it
Flexi-access drawdown lets you adjust what you take from your pension as your needs change. That flexibility is useful. It also makes it easy to take too much in the early years of retirement, when life tends to be most active, and leave yourself exposed later.
A cashflow model can show you how different withdrawal rates play out over time, including what happens if your income needs rise or fall. It turns an abstract concern into something you can see and plan around.
5. Keep a financial buffer
Unexpected costs arrive in retirement just as they do at any other stage of life. A boiler. A car. A period of market volatility that makes drawing on invested assets feel uncomfortable.
An emergency fund means you don’t have to make poor long-term decisions to solve short-term problems.
6. Review regularly
A retirement plan made at 65 will need adjusting at 70, and again at 75. Your health, your spending, your priorities and the markets will all shift. Regular reviews with your financial planner mean you can spot potential problems early, before they’ve already done damage.
Most people spend their working lives making sure they can afford to stop. Fewer think as carefully about making that stop last. A clear plan for your withdrawals isn’t just about protecting a number. It’s about protecting the retirement you planned for: the freedom, the time, the things you said you’d do when work was done.
If you’d like to talk through your pension withdrawals and make sure your plan still fits the way you want to live, please get in touch.
This article is for general information only and does not constitute advice. The information is aimed at individuals only. All information is correct at the time of writing and is subject to change. A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance. The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts. The Financial Conduct Authority does not regulate cashflow modelling.
