Pension Drawdown Calculator

What this calculator does

The Pension Drawdown Calculator models how a UK pension pot in flexi-access drawdown behaves over time. Enter your pot size, the income you want each year, the period you want it to last, and an expected investment growth rate. The calculator returns four numbers: your withdrawal rate as a percentage of the pot, your 25% tax-free lump sum, how many years your pot would last with no investment growth, and your projected pot value at the end of the period.

It's an educational tool, not financial advice. Real outcomes depend on actual investment returns, inflation, fees, tax changes, and your personal circumstances.

Inputs explained

• Pension pot size. The total value of the pension you're putting into drawdown, in pounds. The calculator scales from £10,000 up to £1,000,000.
• Annual income. The amount you'd like to withdraw each year. The calculator divides this by the pot size to get your withdrawal rate.
• Investment period. How many years you want to model — typically your retirement length, e.g. 20–35 years.
• Expected growth. Your assumed annual investment return, after fees. The default of 5% reflects long-run UK equity returns net of typical platform charges; use lower numbers for cautious portfolios.

How to read the results

• Withdrawal rate. If your rate is 4% or below, the calculator marks it as a sustainable rate consistent with the widely-cited "4% rule". Above 4% increases the risk of running out of money; above 5% triggers a warning.
• Tax-free lump sum. 25% of your pot, capped at £268,275 under current rules. You can take this as one lump sum or in instalments.
• Duration (no growth). A worst-case stress test — how long the pot would last if your investments returned zero. Useful as a floor, not a forecast.
• Pot health after N years. Your projected pot value at the end of the period, after annual withdrawals and assumed growth. Anything above 50% of the original pot is healthy; near zero means the strategy is unsustainable.

The 4% rule, briefly

The 4% rule is a planning shorthand: if you withdraw 4% of your initial pot in year one and increase that amount with inflation each year after, the pot is likely (based on US historical data) to last 30+ years. It's a useful starting point, but UK retirees often use 3–3.5% to account for lower expected returns from a UK-weighted portfolio and longer life expectancy than the original US sample.

Tax on what you withdraw

The first 25% of your pot is tax-free. The other 75% is taxed as income at your marginal rate when you draw it. UK income tax bands change each April — as of 2025/26 they are: Personal Allowance £0–£12,570 (0%), Basic Rate £12,571–£50,270 (20%), Higher Rate £50,271–£125,140 (40%), Additional Rate above £125,140 (45%). Check GOV.UK for the current rates.

Once you take any taxable income from your pension, the Money Purchase Annual Allowance (MPAA) reduces your future pension contribution limit from £60,000 to £10,000 per year.

Frequently Asked Questions

What is the 4% rule?

The 4% rule suggests you can withdraw 4% of your pension pot annually with a reasonable expectation it will last 30+ years. It's based on historical market returns and assumes a balanced portfolio. Your personal circumstances may require a different approach.

How is my pension taxed?

You can take 25% of your pension pot as a tax-free lump sum. The remaining 75% is taxable as income when withdrawn. Your income tax rate depends on your total income for the year, including State Pension, employment income and other sources.

What affects my withdrawal rate?

Your sustainable withdrawal rate depends on expected investment growth, inflation, your age and life expectancy, market volatility, and whether you want to leave an inheritance. Younger retirees should generally use a lower withdrawal rate.

Should I take drawdown or an annuity?

Drawdown offers flexibility and potential for growth but carries investment risk and requires active management. Annuities provide guaranteed income for life but offer less flexibility. Many people choose a combination of both.

Is this calculator accurate?

This calculator provides estimates based on the inputs you provide. Actual results will vary due to market performance, inflation, tax changes and personal circumstances. It is not financial advice — always consult a qualified financial adviser before making pension decisions.