What should you do with a £300,000 pension pot?
At £300k the question changes character. Smaller pots are mostly about stretching the money; this one is about picking a structure, because more than one route genuinely works. Full annuitisation now clears a recognised living standard on its own; drawdown keeps every option open; a hybrid buys certainty for the bills and flexibility for everything else. Start from the branch below that sounds most like you.
- 1 Guarantee that I never run out of income→ Annuitise. At July 2026 best-buy rates a healthy 65-year-old converts £300,000 into about £23,580 a year for life (7.86%, level single-life). With the State Pension that is £36,000+ - past the PLSA single moderate benchmark. Get quotes from at least three providers; the open-market difference can be worth £1,500+ a year.
- 2 Keep control of the money and leave something behind→ Flexi-access drawdown. Take the £75,000 tax-free, invest the £225,000, and cap withdrawals near 4% (£9,000 rising with inflation). UK-focused research puts a sustainable real rate at 3.5-4% over 30 years - and the unspent pot can pass to your family, subject to the April 2027 IHT changes.
- 3 Cover the essentials for certain, then stay flexible→ Hybrid. Annuitising £120,000-£150,000 secures roughly £9,500-£11,800 of lifetime income for the bills; the remaining £75,000-£105,000 stays invested in drawdown for travel, family help and lumpy costs. At this pot size the hybrid is the structure regulated advisers most often model first.
- 4 I want to stop work well before State Pension age→ Bridge carefully. From 55 (57 after April 2028) you can phase UFPLS payments - 25% of each slice tax-free - to draw about £16,000 a year nearly tax-free until the State Pension lands at 67. It works, but you are running 5%+ withdrawals for over a decade, so stress-test it and keep a cash buffer. See the Karen scenario below.
The £75,000 tax-free lump sum - and what it leaves behind
A quarter of any money-purchase pension can be taken tax-free, subject to the lifetime Lump Sum Allowance of £268,275 across all your pensions (2026/27 - the cap introduced when the Lifetime Allowance was scrapped in April 2024). On £300,000 that is £75,000 of completely tax-free cash, using just over a quarter of the allowance and leaving generous headroom for any other pensions you hold.
Taking all £75,000 on day one is a choice, not a requirement. Crystallising the pot in slices - phased drawdown or a series of UFPLS payments - releases 25% of each slice tax-free while the rest stays invested. If you have no immediate need for a large lump, phasing usually beats banking £75,000 into a low-interest account where it leaves the pension's tax shelter for good.
Providers must run your first taxable withdrawal through an emergency "Month 1" tax code - HMRC's systems assume the same amount will arrive every month for a year. On a large one-off taxable payment from a £300k pot, tens of thousands of pounds can be withheld that you do not actually owe. The tax-free 25% is unaffected; it is the taxable element that gets over-taxed.
The money comes back - via self-assessment eventually, or much faster with form P55 (partial withdrawal), P53Z (pot emptied, other income) or P50Z (pot emptied, no other income). The scale of the problem is real: HMRC repaid £44.1 million of overpaid pension tax in January-March 2026 alone, averaging about £3,160 per refund. Our emergency tax guide walks through the forms.
30-year drawdown projections on the £225,000 that remains
Slogans like "just take 4%" hide the year-by-year reality. The tables below run the £225,000 left after tax-free cash through 30 years of drawdown, assuming 5% nominal investment growth and withdrawals that start at 3% or 4% of the pot and rise 2.5% a year with inflation. Withdrawals happen at the start of each year; growth applies to what is left. The point is the trajectory, not the pounds-and-pence precision.
| Year | Starting pot | Withdrawal | Growth (5%) | Closing pot |
|---|---|---|---|---|
| 1 | £225,000 | £6,750 | £10,913 | £229,163 |
| 5 | £241,824 | £7,451 | £11,719 | £246,092 |
| 10 | £263,300 | £8,430 | £12,744 | £267,614 |
| 15 | £284,752 | £9,538 | £13,761 | £288,975 |
| 20 | £305,391 | £10,791 | £14,730 | £309,330 |
| 25 | £324,105 | £12,209 | £15,595 | £327,491 |
| 30 | £339,363 | £13,813 | £16,277 | £341,827 |
| Year | Starting pot | Withdrawal | Growth (5%) | Closing pot |
|---|---|---|---|---|
| 1 | £225,000 | £9,000 | £10,800 | £226,800 |
| 5 | £231,269 | £9,934 | £11,067 | £232,401 |
| 10 | £234,717 | £11,240 | £11,174 | £234,651 |
| 15 | £231,175 | £12,717 | £10,923 | £229,381 |
| 20 | £217,666 | £14,388 | £10,164 | £213,442 |
| 25 | £190,258 | £16,279 | £8,699 | £182,679 |
| 30 | £143,773 | £18,418 | £6,268 | £131,623 |
What the shapes tell you: at 3%, growth outruns withdrawals on this smooth path and you finish year 30 with more nominal money than you started with - room for care costs, gifts to grandchildren, or simply spending more later. At 4% the pot broadly treads water, which sounds fine until you remember the smooth path is the optimistic one; a rough opening decade can turn "treads water" into "runs dry around year 25". A 5% rate (£11,250 from £225,000) fails often enough in stochastic modelling that it belongs in the "planned spend-down" category, not the "income for life" one.
Annuity rates on £300,000 - July 2026, by age and shape
Insurers price annuities as income per £100,000, driven by age, health and the shape you choose (level or inflation-linked, single or joint life). The table applies July 2026 rates to the full £300,000; scale by 0.75 if you are annuitising the £225,000 after tax-free cash. The anchor figure is the Hargreaves Lansdown best-buy table showing Aviva at 7.86% for a healthy 65-year-old level single-life on 1 July 2026; the other shapes and ages are mid-market estimates.
| Annuity type | Age 65 income from £300k | Age 67 income from £300k | Age 70 income from £300k |
|---|---|---|---|
| Level single-life | £23,580 (7.86%) | £24,810 (8.27%) | £26,010 (8.67%) |
| Level joint-life (50%) | £21,180 (7.06%) | £22,230 (7.41%) | £23,310 (7.77%) |
| RPI-linked single-life | £17,340 (5.78%) | £18,450 (6.15%) | £19,980 (6.66%) |
| RPI joint-life (50%) | £15,420 (5.14%) | £16,350 (5.45%) | £17,700 (5.90%) |
| Enhanced - smoker example | £24,840 (8.28%) | £26,340 (8.78%) | £27,690 (9.23%) |
Source: HL Best Buy Annuity Rates, Aviva 7.86% single-life level at 65, 1 July 2026; other shapes/ages are mid-market estimates extrapolated with standard pricing differentials. Rates move daily with gilt yields - always obtain a personalised quote, and disclose all health and lifestyle details to unlock enhanced rates.
The strategic reads: waiting from 65 to 70 adds roughly £2,400 a year on the level single-life shape - useful if part-time work or other savings can bridge the gap. Inflation protection costs about £6,200 of starting income at 65 (£17,340 RPI-linked vs £23,580 level); the linked version overtakes the level one only after sustained ~3%+ inflation, but by your 80s the gap in purchasing power on a level annuity is painful. And a 50% survivor's pension trims the 65-year-old rate by around 10% - the price of making sure the income does not die with you.
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Inline calculator - blend annuity and drawdown on your £300k
Set your age, how much of the pot to annuitise, and your drawdown rate. The calculator works on the £225,000 left after your 25% tax-free cash, applies the July 2026 level single-life rates from the table above, and adds the full new State Pension to the total.
Annuity rate used: 8.27%
Annuitised: £112,500 · Drawdown: £112,500
2-3% very safe · 4% historical "safemax" · 5%+ riskier
Total annual income: £26,351
That is £13,804 from your £300k pot plus the £12,547.60 full new State Pension (2026/27) - measured against the PLSA moderate standards of £31,700 (single) and £43,900 (couple). Your £75,000 tax-free cash sits on top of all of this.
Approximate, before tax. Annuity rates are July 2026 best-buy figures and move daily with gilt yields; drawdown sustainability depends on markets and inflation. Use it to compare structures, then get personalised quotes and free Pension Wise guidance.
Three scenarios - the same £300k, three very different retirements
Situation: £300k across two workplace DC schemes, consolidated last year. Reached State Pension age this spring. Values a guaranteed monthly income above everything - his father ran out of savings at 88 and it left a mark.
Gordon does something most guides gloss over: he skips the tax-free lump sum and annuitises the entire £300,000. At 67 the level single-life rate is 8.27%, buying £24,810 a year for life. With his £12,547.60 State Pension his guaranteed income is £37,358 - clear of the PLSA single "moderate" standard of £31,700 with room to spare.
The comparison that decided it: had he taken the £75,000 tax-free first and annuitised the remaining £225,000, the annuity would pay £18,608, giving a total of £31,155 - just £545 short of the moderate benchmark. With no children to leave money to and healthy cash savings already, Gordon valued £6,200 a year of extra guaranteed income more than a lump sum he had no plan for.
Tax: his State Pension absorbs the £12,570 personal allowance almost exactly, so nearly all of the £24,810 annuity is taxed at 20% - about £4,960 a year - leaving net income around £32,400. The trade-offs he accepted: a level annuity loses purchasing power every year, and there is nothing left for beneficiaries. For Gordon, certainty won.
Situation: Marcus built the SIPP through 25 years of contracting; Priya has only a small workplace pot. Both State Pensions already in payment. £35,000 left on the mortgage and a daughter's wedding on the horizon.
They start with the full £75,000 tax-free cash: £35,000 clears the mortgage - instantly cutting their required income - and £40,000 splits between two ISAs as a rainy-day and wedding fund.
The £225,000 remainder goes hybrid, built around Priya's protection if Marcus dies first:
- £100,000 buys an RPI-linked joint-life (50%) annuity at 5.14% = £5,140 a year, inflation-proofed, with half continuing to the survivor. Together with two State Pensions this locks in their essential bills for both lifetimes.
- £125,000 stays in flexi-access drawdown at 4% = £5,000 a year of flexible income for holidays and helping the kids.
Household total: £10,140 of pot income plus £25,095 of State Pensions = £35,235 a year - about £8,700 below the PLSA couple "moderate" of £43,900, but with no mortgage, an inflation-linked floor under the essentials, and a drawdown pot that can flex up in good market years.
Situation: £300k pot, mortgage-free terraced house, £30k redundancy money in cash. Twelve years to go before her State Pension at 67. Wants to know if the pot can carry her alone until then.
Karen's problem is the opposite of Gordon's: no State Pension for twelve years, so the pot must do everything. Her plan is phased UFPLS - a series of lump sums where 25% of each payment is tax-free and 75% is taxable.
She draws £16,000 a year: £4,000 arrives tax-free, and the £12,000 taxable element sits just under her £12,570 personal allowance. With no other income, her tax bill is £0 - £16,000 a year, entirely tax-free, through her late fifties and early sixties.
The risks she is managing: £16,000 is a 5.3% withdrawal rate, well above the "safe" zone, so under a 5% growth assumption the pot drifts down to roughly £250,000 by 67 - and a bad market early on would hurt far more. Her mitigations: the £30k cash buffer means she can pause withdrawals in a crash, and once the State Pension starts she cuts pot withdrawals to around £10,000, dropping to a sustainable ~4% of what remains for a combined ~£22,500 a year.
Two rule details matter here. Taking any taxable UFPLS payment triggers the Money Purchase Annual Allowance, capping future pension contributions at £10,000 a year - relevant if she takes part-time work. And the normal minimum pension age rises from 55 to 57 in April 2028; Karen is accessing hers before the change bites, but a 53-year-old reading this today will wait until 57.
£300k against the PLSA Retirement Living Standards 2025/26
| Standard | Single (one-person) | Couple (two-person) |
|---|---|---|
| Minimum | £13,400 | £21,600 |
| Moderate | £31,700 | £43,900 |
| Comfortable | £43,900 | £60,600 |
| £300k pot + State Pension | ~£24,500 drawdown / ~£36,100 annuity | ~£37,100 (couple, one pot) |
Source: Retirement Living Standards 2025/26 update from Pensions UK (formerly the PLSA), researched by Loughborough University's Centre for Research in Social Policy.
This is the headline that separates £300k from every smaller pot on this site: the route you choose decides which side of "moderate" you land on. A single retiree who annuitises the full pot at 65 gets ~£23,580 + £12,547.60 State Pension = ~£36,100 - the first pot in our series to clear the £31,700 single moderate standard on guaranteed income alone. Choose drawdown at 4% instead and you sit at ~£24,500, roughly £7,200 short of moderate but with a flexible, potentially inheritable £225,000 still invested. For a couple living off one £300k pot plus two State Pensions, ~£37,100 lands well above the £21,600 minimum but £6,800 shy of the couple moderate of £43,900.
How your £300k income is actually taxed
The State Pension is taxable, and in 2026/27 it swallows the personal allowance nearly whole. That means drawdown income from a £300k pot is taxed from close to the very first pound:
- Full new State Pension 2026/27: £12,547.60
- Personal Allowance: £12,570
- Allowance left for pension withdrawals: £22.40
Draw the 4% figure of £12,000 alongside your State Pension and gross income is ~£24,548; the tax is roughly (12,000 − 22.40) × 20% ≈ £2,395, netting you about £22,150. Annuitise the full pot (Gordon's route) and the bigger income means a bigger bill - around £4,960 on £37,358 gross. Either way the £75,000 tax-free cash never enters the calculation, and staying under £50,270 of total taxable income keeps you out of the 40% band. Full detail in how drawdown is taxed.
Accepting your existing provider's annuity quote is the single most expensive default in retirement. FCA Retirement Income Market Data shows roughly 6 in 10 annuity buyers now switch provider at purchase - which still leaves a large minority taking an un-shopped rate. On £300,000 the spread between a middling quote and the best buy is commonly £1,800-£3,000 a year, every year, for life. Three quotes minimum; five is better.
And answer the medical questions honestly - in this market, poor health is rewarded. A smoker's enhanced rate at 65 (8.28%) pays about £1,260 a year more than the standard 7.86%. Pension Wise remains free, impartial and an hour well spent before any of it.
Market context: drawdown still outsells annuities by around four to one in the FCA's retirement income data, but annuity sales have been climbing since rates repriced in 2022-23 - and £300k is precisely the pot size where the guaranteed route starts clearing meaningful living-standard benchmarks, which is why the trend shows up strongest here.
Compare with other pot sizes
£300k sits at a genuine threshold in our pot-size series: big enough that guaranteed income alone reaches a "moderate" lifestyle for a single retiree, not yet big enough for "comfortable" without other assets.
If you are weighing routes at this pot size, the two most useful companion reads are the safe withdrawal rate guide (why UK research lands at 3.5-4%) and drawdown vs annuity (the hybrid arithmetic worked through in full).
Frequently asked questions
- How much income will a £300k pension pot give me?
- Two very different answers, depending on route. Drawdown at the 4% rule gives around £12,000 a year before tax from the full £300,000 - or £9,000 a year from the £225,000 left after taking the £75,000 tax-free lump sum. An annuity buys certainty instead: at July 2026 best-buy rates (7.86% level single-life at 65, Aviva via HL) the full £300,000 converts to roughly £23,580 a year for life, or £17,685 on the post-lump-sum £225,000. Stack the full new State Pension of £12,547.60 (2026/27) on top and you are looking at £24,500 (drawdown) up to £36,000+ (full annuitisation) a year.
- Can I retire at 55 with £300k?
- You can access the pot from 55 (rising to 57 in April 2028), but you would be funding 12 years before the State Pension arrives at 67 - the pot has to do all the work alone. Drawing £15,000-£16,000 a year from 55 is a withdrawal rate above 5%, which stochastic modelling flags as risky over a 40-year horizon; however, once the State Pension starts you can cut pot withdrawals sharply, which changes the maths. A phased UFPLS strategy - where 25% of each payment is tax-free - can deliver about £16,000 a year almost tax-free before 67 if you have no other income. It is doable for a frugal single person with no mortgage; it is tight for a couple relying on one pot.
- Is £300k enough to retire in the UK?
- For a single person with the full State Pension, yes - and £300,000 is the first pot size where the annuity route clears the PLSA "moderate" living standard. Annuitising the full pot at 65 (7.86%) gives about £23,580 a year; add £12,547.60 State Pension and you exceed £36,000, comfortably past the single moderate benchmark of £31,700 (2025/26). The drawdown route lands nearer £24,500, above minimum but below moderate - the trade-off being flexibility and an inheritable pot. For a couple sharing one £300k pot, two State Pensions take the household to roughly £37,000, still short of the £43,900 couple moderate standard.
- What annuity will I get for £300k?
- At July 2026 best-buy rates, a healthy 65-year-old buying a level single-life annuity (7.86%, Aviva via Hargreaves Lansdown) gets about £23,580 a year for life from £300,000. Waiting to 67 lifts that to roughly £24,810; at 70, about £26,010. Inflation protection costs a big starting haircut: an RPI-linked single-life annuity at 65 (~5.78%) starts at £17,340 but rises each year. A 50% joint-life level annuity at 65 pays around £21,180. Smokers and people with qualifying medical conditions should always get enhanced quotes - around 8.28% at 65, worth about £1,260 a year more than the standard rate.
- How long will £300k last in drawdown?
- At 4% (£12,000 a year rising with inflation) a globally diversified portfolio has historically lasted 30+ years in around 90% of scenarios - though Morningstar's recent research trims the safe rate to about 3.7% for a 90% success rate. At 3% (£9,000 a year) the pot very likely outlives you and can even grow in real terms. Push withdrawals to 5-6% (£15,000-£18,000) and depletion in 18-25 years becomes a realistic outcome if returns disappoint early. The biggest single risk is sequence of returns: a deep market fall in the first five years of withdrawals does far more damage than the same fall later on.
- Is £300k a good pension pot for the UK?
- It is roughly double what the average retiree actually has. The ONS Wealth and Assets Survey puts the median private pension pot at £32,700 across all adults, and even in the peak 65-74 age band the average is only about £145,900. A £300,000 pot puts you around the top 20% of UK pension savers. That does not automatically mean a lavish retirement - it means real choices: full annuitisation clears the PLSA single moderate standard, drawdown keeps flexibility and inheritance, and a hybrid can do a bit of both.
- How is income from a £300k pension pot taxed?
- The 25% lump sum - £75,000, well inside the £268,275 Lump Sum Allowance - is tax-free. Everything else is taxable income in the year you draw it. The catch: the full new State Pension (£12,547.60) consumes almost the entire £12,570 Personal Allowance (2026/27), leaving just £22.40 of headroom. So a £12,000 drawdown withdrawal on top of the State Pension is taxed almost in full at 20% - roughly £2,395 a year - for a net income around £22,150. Keep total taxable income under £50,270 to stay out of the 40% band.
- Should I buy an annuity or use drawdown with £300k?
- At £300k the annuity argument is stronger than at smaller pot sizes, because full annuitisation plus State Pension clears the PLSA moderate standard - guaranteed, for life, no market risk. But you give up flexibility, inflation exposure is real on a level annuity, and from April 2027 an unspent drawdown pot is at least still inheritable (albeit inside the IHT estate). Many advisers split the difference at this size: annuitise £120,000-£150,000 to lock essential bills, run the rest as drawdown. Your health matters too - enhanced annuity rates can be 10-40% higher, which shifts the whole comparison.
- Can I take my £300k pension as a single cash lump sum?
- Legally yes; financially it is usually a very expensive move. Only £75,000 comes out tax-free. The remaining £225,000 is added to your income in that tax year: most of it lands in the 40% and 45% bands, and because adjusted income above £100,000 tapers the personal allowance to nil, your effective rate on a middle slice hits 60%. The total tax bill on a one-year encashment can exceed £80,000. Spreading withdrawals across tax years via drawdown or UFPLS keeps far more of the money yours - and beware the Month 1 emergency tax code HMRC applies to first withdrawals.
- What happens to a £300k pension pot when I die?
- Under current rules (until 5 April 2027) an unused DC pot passes to your nominated beneficiaries outside your estate, free of inheritance tax - income-tax-free too if you die before 75, taxed at the beneficiary's marginal rate after 75. From 6 April 2027, unused pension funds and most lump-sum death benefits are pulled inside the estate for IHT, with exemptions for a spouse, civil partner or charity. For a £300,000 pot left to adult children after that date, IHT at 40% above the nil-rate bands plus beneficiary income tax can stack up significantly - which is why beneficiary nominations and spousal planning deserve a review before April 2027.
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