£1,250,000 pension pot: what income will it give?

Retiring at 67 with £1,250,000 and the full State Pension, you could draw about £59,608 a year after tax (£4,967 a month) in today's money until age 95. About £47,295 of that comes from the pot and the rest from the State Pension. That assumes balanced investments growing on average.

At about £59,608 a year it is planned to last to 95 if markets deliver average returns, which happened in 43% of 1,000 simulated markets. A more cautious income of £43,950 a year lasted to 95 in 9 out of 10 of them.

Usually 25%, so £268,275, capped by the £268,275 lump sum allowance. You can take it in one go or a quarter of each withdrawal. The rest is taxed as income when you draw it.

On top of the full State Pension, cashing in £1,250,000 in one tax year would cost about £433,626 in income tax, leaving £816,374. Spread over 10 years the tax falls to about £338,640. Your first withdrawal is often taxed on an emergency code, and any overpaid tax can be reclaimed from HMRC.

With the full State Pension, £1,250,000 gives about £59,608 a year, which meets the comfortable Retirement Living Standard for one person (£45,400 a year after tax). Whether it is enough depends on your costs, your home and any partner's income.

Retiring at 60, the same pot gives a flat income of about £51,651 a year to 95, lower because it has to cover the years before your State Pension starts and last longer overall.