What Pension Pot Do You Need for £20,000 a Year?
Most pension calculators ask what you will save. This one asks what you want to spend. Type in the yearly income you are aiming for, pick your age, and see the pot an insurer would need to pay it for life at today's best-buy annuity rates.
Pension pot needed for your target income
Single life, five-year guarantee, £100,000 pot, average postcode, paid monthly in advance. Hargreaves Lansdown best-buy rates, 8 October 2026. Rates for ages between the quoted ones are straight-line estimates. This is an illustration, not a quote.
What the figures say
Take £20,000 a year as the target. A 65-year-old buying a level annuity needs about £245,800. The same person buying one that rises with inflation needs about £359,500. Waiting until 70 helps: the level figure drops to about £226,900 and the inflation-linked one to about £315,700. Insurers pay more the older you are, because they expect to pay for fewer years.
Those numbers look large because they ignore the State Pension. The full new State Pension is £12,547.60 a year in 2026/27 (GOV.UK). If you will get all of it, you only need about £7,452 a year from your pot. At 68, buying that with an inflation-linked annuity costs roughly £123,700. That is the real answer for most people, and it is why a £20,000 income is less out of reach than the headline suggests.
The rule of thumb
A level annuity at 65 costs roughly £12 of pot for every £1 of yearly income. An inflation-linked one costs roughly £18. Multiply your target income by those numbers for a quick check, then use the calculator above for your age.
Best-buy annuity rates, age by age
These are the best rates Hargreaves Lansdown found on 8 October 2026 for a £100,000 pot. The cost columns show the pot needed for each £1,000 of yearly income, which is the number to scale up or down for your own target.
| Age | RPI-linked income | Cost of £1,000 a year | Level income | Cost of £1,000 a year |
|---|---|---|---|---|
| 55 | £4,451 | £22,467 | £7,070 | £14,144 |
| 56 * | £4,538 | £22,036 | £7,148 | £13,990 |
| 57 * | £4,624 | £21,626 | £7,226 | £13,839 |
| 58 * | £4,711 | £21,227 | £7,305 | £13,689 |
| 59 * | £4,797 | £20,846 | £7,383 | £13,545 |
| 60 | £4,884 | £20,475 | £7,461 | £13,403 |
| 61 * | £5,020 | £19,920 | £7,596 | £13,165 |
| 62 * | £5,156 | £19,395 | £7,732 | £12,933 |
| 63 * | £5,292 | £18,896 | £7,867 | £12,711 |
| 64 * | £5,428 | £18,423 | £8,003 | £12,495 |
| 65 | £5,564 | £17,973 | £8,138 | £12,288 |
| 66 * | £5,718 | £17,489 | £8,273 | £12,088 |
| 67 * | £5,873 | £17,027 | £8,409 | £11,892 |
| 68 * | £6,027 | £16,592 | £8,544 | £11,704 |
| 69 * | £6,182 | £16,176 | £8,680 | £11,521 |
| 70 | £6,336 | £15,783 | £8,815 | £11,344 |
| 71 * | £6,579 | £15,200 | £9,023 | £11,083 |
| 72 * | £6,823 | £14,656 | £9,231 | £10,833 |
| 73 * | £7,066 | £14,152 | £9,438 | £10,595 |
| 74 * | £7,310 | £13,680 | £9,646 | £10,367 |
| 75 | £7,553 | £13,240 | £9,854 | £10,148 |
* Estimated by straight-line interpolation between the quoted ages (55, 60, 65, 70 and 75). Single life, five-year guarantee. Annual income per £100,000, before tax.
Level or inflation-linked?
A level annuity pays more on day one, but the amount never changes. At 2% inflation, £20,000 buys what £16,400 buys after ten years, and what £13,500 buys after twenty. An inflation-linked annuity starts about a third lower and keeps its buying power. Neither is wrong. The choice is between more now and more later, and it is permanent once you buy. For a longer look at the trade-off, see our guide to annuity versus drawdown.
What this does not include
Annuity income is taxable, so £20,000 gross is less in your pocket. If you take the 25% tax-free cash first, only the remaining 75% is available to buy the annuity, so the total pot you need is the figure above divided by 0.75. The calculator shows both. Health, smoking and postcode can raise your rate, sometimes by a lot, so get a personal quote before you decide anything. Our guide to the 25% tax-free lump sum covers how that works.
For a longer write-up of what it costs to replace the State Pension itself, see my article on Monevator.
Common questions
How much pension pot do I need for £20,000 a year?
It depends on your age and the type of annuity. At best-buy rates on 8 October 2026, a 65-year-old needs about £245,800 for a level annuity paying £20,000, or about £359,500 for one that rises with inflation (RPI). A 70-year-old needs about £226,900 level or £315,700 inflation-linked. The State Pension reduces the pot you need.
Why does an inflation-linked annuity need a bigger pot?
An annuity that rises each year starts lower than a level one, because the insurer expects to pay out more later. At 65, the best-buy inflation-linked rate on 8 October 2026 was £5,564 a year per £100,000, against £8,138 for a level annuity with the same guarantee.
Does the State Pension count towards £20,000 a year?
Yes. The full new State Pension for 2026/27 is £12,547.60 a year (GOV.UK). If you will get the full amount, a £20,000 target leaves about £7,452 a year to come from your pension pot, which is far cheaper to fund than the full £20,000.
Are these annuity rates guaranteed?
No. They are Hargreaves Lansdown best-buy rates for a £100,000 pot on 8 October 2026, for an average postcode and paid monthly in advance. Rates change every week and your own quote depends on your age, health, postcode and the options you choose.
The short version
You can price a retirement income in one step: divide it by the annuity rate. Do it after taking the State Pension into account, because it covers a large slice for free. Then check how your own pot compares with how much pension you should have.
Sources
- Annuity rates: Hargreaves Lansdown best annuity rates, quotes generated 8 October 2026. Single life, five-year guarantee, £100,000, average postcode, paid monthly in advance. Ages 56 to 59, 61 to 64, 66 to 69 and 71 to 74 are my straight-line estimates.
- Full new State Pension 2026/27 (£241.30 a week, £12,547.60 a year): GOV.UK.
- 25% tax-free lump sum and the £268,275 allowance: GOV.UK / HMRC. Figures correct as of October 2026.
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This page is for general information only and does not constitute financial advice. The annuity rates shown are market examples from 8 October 2026 and change constantly; your personal rate will differ. Results are illustrations, not quotes. An annuity cannot be reversed once bought. For advice tailored to you, speak to a financial adviser regulated by the Financial Conduct Authority (FCA), get free guidance from MoneyHelper, or book a free Pension Wise appointment if you are over 50.