Retired 10 years ago with £100k - how much is left?

Important information - the value of investments and the income from them can go down as well as up, so you may get back less than you invest.

And as we show below, the results hold if portfolios had included a large weighting of risk-reducing bonds to sit alongside shares.  

Taken together, the analysis reveals that it has been a golden decade to be retired and living from investments - albeit with plenty of bumps along the way.  

April 2015 was the moment when this method of funding retirement exploded thanks to ‘Pensions Freedoms’. This was the rule-change that removed the obligation on most people to use retirement savings to buy an annuity - the product that takes your pension and provides a guaranteed income in return. 

• Find out more about your retirement income options

As a retiree, you suddenly had the freedom to use savings however you wished and to gain when investments did well. But you also carried the risk of investments performing badly, and in extreme cases of your pension savings running dry before you stop needing them. 

Those delicate early years of retirement - when the bulk of your pot is exposed to the risk of market falls - can be key in determining the income you have for the rest of your life.  

So, ten years after Pension Freedoms were introduced, we wanted to check in on the first cohort to take advantage of them. How have markets treated them? How much income have they been able to safely take from their funds - and how much do they have left now? 

A decade of ‘decumulation’ 

To assess their progress, we imagined someone with £100,000 of invested pension savings who retired on the first day of the new rules on 6 April 2015. 

We ran the numbers to show how their pot has changed in value in the decade since, assuming different levels of withdrawals. We then tweaked the mix of assets they held to see what effect adding greater diversification has had. The charts and tables below show the results.  

Our starting point was a pot invested 100% in global shares, with withdrawals set at 4% a year and then rising annually by an amount to reflect inflation. This is the ‘4% rule’ - a long-standing principle that suggests this level of income is sustainable for 30 years or more in the vast majority of cases.  

• Read: The 4% rule: the basics 

We then modelled for 5%, 6% and 7% withdrawals, before repeating the whole exercise for a portfolio of 60% shares and 40% bonds - a common method of diversification. Income was taken once a year from the end of the first year onwards.  

An important note - these results are based on performance in the past. They are no guide to what will happen in the future and should not be used as the basis for any financial plans. In reality, a well-constructed financial plan will include mitigations to help reduce the risks we highlight here. There’s more on that below.  

What jumps out immediately is just how well the class of 2015 have done, even if withdrawals were dialled up to 6% or 7% - above what any prudent financial adviser would advise. 

With withdrawals at 4% the pot will have grown to £189,000. Even 7% withdrawals would have left more than £131,000. And remember, there is now 10 fewer years of retirement to pay for. 

So - for retirees living from investments, these past 10 years have undoubtedly provided favourable market conditions.  

But we only know that in hindsight, and there have still been moments of high anxiety along the way. Consider that even the most prudent - those withdrawing 4% - saw their pot sink to below £82,000 just 10 months after commencing their retirement. At that point, it would have felt extremely unlikely to them their pot would last another 30 years. 

Smoothing out the ride 

The accepted way to reduce volatility in any portfolio is through diversification, so we ran the numbers again using a portfolio of 60% shares and 40% bonds - a traditional way to reduce risk. 

The results are laid out in the chart and table below. Straightaway you can see how adding bonds into the mix has hampered overall performance, but also reduced volatility. 

A 60/40 mix was successful in reducing downside risk. The worst it got for retirees in this strategy was a drop in the value of their pots to around £89,000 in the first year, and the ride was smoother after that. It’s noteworthy that during a period which has included prolonged high inflation and interest rates, which typically hurt bond performance, 60/40 pots managed to grow over the period, even with withdrawals set at 7%.

2015-2025 - a golden decade?

At a high level it is clear markets have been kind to the first cohort retiring under pensions freedoms.

Key has been the relatively quick recoveries markets have made from setbacks. Both the outbreak of Covid-19 in 2020 and the outbreak of war in Ukraine in 2022 produced significant falls in markets, but these were recovered in short order. That’s very important for anyone decumulating their investments because it reduces the need to sell assets at depressed prices in order to produce income.

Drawdown vs. annuity

For those deciding in 2015 between relying on markets to produce their income via drawdown and buying an annuity - there’s only been one winner.

Back then, £100,000 would have bought a single life annuity (for a 65-year-old, no escalation) that paid £5,304² a year. Very few would now choose that over the alternative produced by markets, where it has been possible to take similar levels of income and more, while also leaving you with a pot that’s bigger now than when you started - and which still belongs to you.

A plan for the next ten years?

Unfortunately, we can’t base our plans for the future on what’s happened in the past. Those weighing up their retirement income options today may not be as lucky as previous retirees have been with market conditions.

One practical way to reduce the risk of market falls hurting your income is to build a cash pot into your plans. Professional advisers often recommend two or even three years’ worth of income to be held in cash. Day-to-day income can be taken from this pile and then replenished after a year if market conditions allow.

If markets have fallen you have the option of taking only income produced naturally through dividends or bond interest, or of leaving investments completely untouched while you take another year’s income from the cash pile. With luck, markets will have overcome any setback by the time you really need to sell assets.

While it makes sense to focus on the risk that you run out of money, an opposite risk also exists - that you don’t make the most of your income because you’ve been too cautious.

Professional financial advice can help. The government’s Pension Wise service offers free, impartial guidance to help you understand your options at retirement. You can access the guidance online at www.moneyhelper.org.uk or over the telephone on 0800 011 3797.

Fidelity’s retirement specialists can provide you with free guidance to help you with your decisions. Our advisers use cash-flow modelling tools to help you plot a sustainable - but optimised - plan for income in retirement.

Source:

¹ Gov.uk, Private pensions statistics, table 9, 31 July 2024.
² The Annuity Project, February 2025 

Past performance is not a reliable indicator of future returns

Source: Refinitiv, total returns from 28.2.20 to 28.2.25. Excludes initial charge.