£600,000 Saved: Now What?
At £600,000 the accumulation job is largely done, and the harder discipline begins: converting a fund into decades of income without paying more tax than necessary or taking risks you no longer need.
The pot becomes accessible at 55 (57 from 6 April 2028). Full crystallisation would release £150,000 – the 25% tax-free maximum – and commit the remaining £450,000 to producing income via drawdown, annuity purchase or both.
Meet Dave, 55 this year, who wants to drop to three days a week rather than stop outright. For him the appeal of a £600k pot is that it does not have to be switched on all at once – he can crystallise slices as his salary tapers, keeping tax low throughout. One warning applies to anyone following his path: flexibly accessing taxable pension income triggers the Money Purchase Annual Allowance, sharply limiting what can still be contributed to a pension afterwards, so partial retirees should take the tax-free element first where possible.
Turning £600k Into Retirement Income
Guaranteed-for-life or invested-and-flexible: the two paths behave differently in every scenario that matters – longevity, market crashes, inflation, inheritance. Starting incomes compare as follows.
| Option | Annual Income | Monthly Income | Key Feature |
|---|---|---|---|
| Level annuity (age 67) | £23,400 | £1,950 | Guaranteed for life |
| Drawdown at 4% | £18,000 | £1,500 | Flexible, pot remains invested |
| Drawdown at 3.5% | £15,750 | £1,313 | More conservative, longer lasting |
All rows are computed on the £450,000 left once the maximum tax-free cash is taken. The annuity price is for a level, single-life contract at 67 on 2026 rates, while the drawdown figures apply each percentage to the remaining balance – meaning actual payouts track fund performance.
The drawdown route
Flexi-access drawdown suits phased retirements exactly like Dave's: income scales up as work scales down, withdrawals can skip years entirely, and unspent capital stays invested for growth and for heirs. The risk is equally clear – sustained poor returns while withdrawing can permanently impair the fund.
The annuity route
For income you never have to think about again, nothing beats a lifetime annuity, and current rates make the exchange unusually favourable. It fits people whose other guaranteed income stops at the State Pension. Health disclosures can unlock enhanced terms, so complete the medical questionnaire honestly and shop several insurers before committing. With £600k there is ample room to annuitise the household budget and keep six figures invested besides.
Keeping the Taxman's Share of £600k Small
The tax-free quarter here is £150,000; all other withdrawals are taxed as income in the year taken.
For 2026/27 the personal allowance sits at £12,570 and the full new State Pension at £12,548 – a near-perfect overlap that leaves pension withdrawals exposed from the first pound. Basic rate runs to £50,270 of total income; beyond that, 40%.
A £600k pot can easily generate higher-rate liabilities if drawn casually. The remedies are old but effective: phase crystallisation, spread big withdrawals over multiple tax years, and treat the threshold as a hard annual ceiling wherever possible.
Death-benefit planning has also moved up the agenda: from April 2027, unspent pension wealth is expected to count toward inheritance tax. For six-figure pots, reviewing beneficiary nominations and the order in which you spend assets – with professional advice – is now core planning, not an optional extra.
Crystallising in stages
UFPLS turns the pension into a series of taps rather than one big valve: each withdrawal delivers 25% tax-free and 75% taxable, and whatever stays uncrystallised keeps growing with its tax-free entitlement attached.
Retiring on £600k: Realistic?
Comfortably so. The £23,400 annuity income plus a £12,548 State Pension totals about £35,948 – beyond the PLSA moderate standard and closing in on the £43,100 comfortable benchmark, before counting any other savings. Drawdown offers scope to front-load income during the most active years, then ease off as spending naturally falls in later retirement.
Tactics for a £600k Pot
- Phase, don't binge: crystallising in tranches keeps every year's tax bill deliberate.
- Bank the deferral uplift: a State Pension claimed later grows by roughly 5.8% for each year of delay.
- Respect the higher-rate line: £50,270 is the number to plan withdrawals around.
- Split the job between products: guaranteed income for fixed costs, drawdown for variable ones.
- Reshape the portfolio for spending: volatility you shrugged off while saving becomes dangerous once withdrawals start.
What Happens to £600k on Death?
Drawdown funds pass outside the traditional estate to your nominated beneficiaries: no income tax if you die before 75; their marginal rate on withdrawals if after.
An annuity's payments normally die with the annuitant. Where a spouse or partner relies on the income, joint-life terms or a guarantee period – chosen at purchase – keep money flowing after your death.