Pension Duration: How Long Will Your Money Last?

Thinking about retirement? One of the biggest questions is how long your pension will stretch. If you pull out too fast, you could run out of money early. If you’re too cautious, you might leave cash on the table. Understanding pension duration helps you strike the right balance and enjoy a worry‑free retirement.

What is pension duration?

Pension duration is the period your retirement funds are expected to last, based on your withdrawals, life expectancy, and any investment growth. It’s not a fixed number – it changes with health, market conditions, and spending habits. In plain terms, it answers the question: "If I start drawing today, how many years will I have money for?"

How to estimate a realistic pension duration

Start with a simple spreadsheet. List your current pension pot, expected annual withdrawal, and an assumed growth rate (often 3‑4% after inflation). Then factor in your age and average life expectancy – the UK Office for National Statistics suggests about 85 for men and 88 for women. Adjust the withdrawal amount up or down until the ending balance hits zero around that age. That gives you a rough duration.

Next, add a safety buffer. Life is unpredictable, and markets can be volatile. Many advisers recommend planning for a 10‑15% lower withdrawal rate than your calculator suggests. That extra cushion can protect you if a downturn hits early in retirement.

Don’t forget inflation. Even a modest 2% rise each year erodes purchasing power. If you plan for a £20,000 annual income today, you’ll need more in 10 years. Use an inflation‑adjusted growth rate in your spreadsheet to keep the picture realistic.

Consider your spending patterns. Big expenses like travel, home repairs, or health care can spike in certain years. Build those into your model as one‑off withdrawals rather than treating every year the same.

Choosing the right pension product matters too. An annuity guarantees a set income for life, which can simplify duration calculations. A drawdown plan lets you keep investments growing, but you’ll need to monitor withdrawals closely to avoid depleting the pot too soon.

Here are three practical steps to improve your pension duration outlook:

1. Revisit your budget annually and adjust withdrawals based on actual spend and market performance.
2. Keep a portion of your fund in low‑risk assets to provide stability during market dips.
3. Stay healthy – better health often means a longer, more active retirement, which can affect both your expenses and life expectancy assumptions.

Common mistakes to avoid include pulling out a fixed amount without considering inflation, ignoring tax implications, and assuming the market will always grow. A sudden drop in stock values early in retirement can dramatically shorten your pension duration if you don’t have a plan.

Finally, talk to a qualified financial adviser. They can run sophisticated simulations, factor in state pension and other income streams, and help you choose the best mix of annuity and drawdown. With a clear view of your pension duration, you’ll feel more confident making everyday decisions and can focus on enjoying your retirement rather than worrying about money.