Taking Your Pension — Annuities, Drawdown & Lump SumsPension Drawdown Calculator UK — How Long Will Your Pension Last?
Calculate pension drawdown sustainability. Work out how long your pension pot will last, sustainable withdrawal rates, and income tax on pension withdrawals.
Pension drawdown lets you take flexible income from your pension. Here’s how to calculate sustainable withdrawals.
For the wider cluster covering pension tax relief, lump sums, drawdown tax planning and annuity choices, use the main Pension Tax hub.
Drawdown Basics
How Drawdown Works
| Step | What Happens |
|---|
| 1 | Move pension to drawdown |
| 2 | Take 25% tax-free (optional) |
| 3 | Invest remaining 75% |
| 4 | Withdraw income as needed |
| 5 | Remainder stays invested |
Drawdown vs Annuity
| Feature | Drawdown | Annuity |
|---|
| Flexibility | High | Low |
| Guaranteed income | No | Yes |
| Investment risk | You bear it | Insurer bears it |
| Can run out | Yes | No |
| Death benefit | Pot to heirs | Usually stops |
| Income level | You choose | Fixed |
Sustainable Withdrawal Rates
Traditional Guidelines
| Withdrawal Rate | Historical Sustainability |
|---|
| 3% | Very conservative, likely to grow |
| 3.5% | Conservative, high success |
| 4% | Traditional “safe” rate |
| 4.5% | Moderate risk |
| 5% | Higher risk of running out |
| 6%+ | High risk, likely to deplete |
What Affects Sustainability
| Factor | Impact |
|---|
| Investment returns | Higher = longer |
| Inflation | Higher = shorter |
| Your lifespan | Longer = need lower rate |
| Starting age | Earlier = lower rate needed |
| Flexibility | Can you reduce if needed? |
How Long Will Your Pension Last?
£100,000 Pension Pot
| Withdrawal | 0% Return | 3% Return | 5% Return |
|---|
| £4,000/year (4%) | 25 years | 34 years | 50+ years |
| £5,000/year (5%) | 20 years | 25 years | 35 years |
| £6,000/year (6%) | 16.7 years | 20 years | 26 years |
£250,000 Pension Pot
| Withdrawal | 0% Return | 3% Return | 5% Return |
|---|
| £10,000/year (4%) | 25 years | 34 years | 50+ years |
| £12,500/year (5%) | 20 years | 25 years | 35 years |
| £15,000/year (6%) | 16.7 years | 20 years | 26 years |
£500,000 Pension Pot
| Withdrawal | 0% Return | 3% Return | 5% Return |
|---|
| £20,000/year (4%) | 25 years | 34 years | 50+ years |
| £25,000/year (5%) | 20 years | 25 years | 35 years |
| £30,000/year (6%) | 16.7 years | 20 years | 26 years |
£750,000 Pension Pot
| Withdrawal | 0% Return | 3% Return | 5% Return |
|---|
| £30,000/year (4%) | 25 years | 34 years | 50+ years |
| £37,500/year (5%) | 20 years | 25 years | 35 years |
| £45,000/year (6%) | 16.7 years | 20 years | 26 years |
Tax on Pension Drawdown
The 25% Tax-Free Amount
| Option | How It Works |
|---|
| Lump sum upfront | Take 25% tax-free immediately |
| Per withdrawal | 25% of each withdrawal is tax-free |
| Combination | Take some upfront, rest phased |
| Maximum tax-free | Currently £268,275 (25% of £1,073,100) |
Tax on the 75%
| Total Income | Tax Rate on Pension |
|---|
| Up to £12,570 | 0% |
| £12,571 - £50,270 | 20% |
| £50,271 - £125,140 | 40% |
| Over £125,140 | 45% |
Example: £30,000 Withdrawal
| Element | Amount | Tax |
|---|
| Tax-free (25%) | £7,500 | £0 |
| Taxable (75%) | £22,500 | See below |
| If Only Income | Tax Calculation |
|---|
| £22,500 taxable | |
| Personal Allowance | £12,570 @ 0% = £0 |
| Basic rate | £9,930 @ 20% = £1,986 |
| Total tax | £1,986 |
| Net from withdrawal | £28,014 |
Example: £30,000 + State Pension
| Income Source | Amount |
|---|
| State Pension | £11,500 |
| Pension drawdown | £30,000 |
| Tax-free portion | -£7,500 |
| Total taxable | £34,000 |
| Tax Calculation | Amount |
|---|
| Personal Allowance | £12,570 @ 0% = £0 |
| Basic rate | £21,430 @ 20% = £4,286 |
| Total tax | £4,286 |
Tax-Efficient Withdrawal Strategy
Phased Withdrawals
| Strategy | Benefit |
|---|
| Stay in basic rate | Avoid 40% tax |
| Use Personal Allowance | Tax-free income |
| Spread large withdrawals | Avoid higher brackets |
| Consider timing | ISA vs pension |
Optimal Withdrawal Order
| Order | Source | Reasoning |
|---|
| 1 | State Pension | Automatic, no choice |
| 2 | ISA income | Tax-free |
| 3 | Pension up to basic rate | 20% or less |
| 4 | Other income | As needed |
Annual Tax-Efficient Amount
| Other Income | Optimal Pension Withdrawal |
|---|
| £0 | ~£29,000 taxable stays basic rate |
| State Pension (£11,500) | ~£17,500 taxable stays basic |
| With 25% tax-free | Gross ~£23,000 for £17,250 taxable |
Calculating Your Drawdown
Step-by-Step Calculator
| Step | Your Numbers |
|---|
| 1. Pension pot value | £_______ |
| 2. Tax-free lump sum (25%) | £_______ |
| 3. Remaining pot | £_______ |
| 4. Desired annual income | £_______ |
| 5. Withdrawal rate (÷ step 3) | _______% |
| 6. Sustainable? (<4%) | Yes/No |
Example Calculation
| Step | Example |
|---|
| Pension pot | £400,000 |
| Tax-free lump sum (25%) | £100,000 |
| Remaining pot | £300,000 |
| Desired income | £15,000/year |
| Withdrawal rate | 5% |
| Sustainability | Medium risk |
Strategies by Age
Age 55-65 (Early Retirement)
| Consideration | Strategy |
|---|
| Long time horizon | Lower withdrawal rate |
| Before State Pension | Bridge with drawdown |
| Maximum tax-free use | Fill lower tax bands |
| Target rate | 3-3.5% if possible |
Age 65-75
| Consideration | Strategy |
|---|
| State Pension starts | Reduce drawdown need |
| Still long horizon | 3.5-4% |
| Review regularly | Adjust to pot performance |
Age 75+
| Consideration | Strategy |
|---|
| Shorter horizon | Can increase rate |
| Health consideration | Factor in life expectancy |
| Inheritance planning | Death benefits change |
| Possible rate | 4-5% if flexible |
Investment Strategy in Drawdown
Asset Allocation Approaches
| Approach | Allocation | Risk |
|---|
| Conservative | 30% equities, 70% bonds | Lower |
| Balanced | 50% equities, 50% bonds | Medium |
| Growth | 70% equities, 30% bonds | Higher |
Sequence of Returns Risk
| Risk | Meaning |
|---|
| Bad early years | Depletes pot faster |
| Good early years | Pot grows, more secure |
| Mitigation | Cash buffer for 1-2 years |
Cash Buffer Strategy
| Element | Purpose |
|---|
| Hold 1-2 years’ income in cash | Don’t sell in down markets |
| Replenish in good years | Sell when markets up |
| Reduces sequence risk | Smoother ride |
Pension Summary Tables
Withdrawal Amount by Pot Size (4%)
| Pot Size | Annual (4%) | Monthly |
|---|
| £100,000 | £4,000 | £333 |
| £200,000 | £8,000 | £667 |
| £300,000 | £12,000 | £1,000 |
| £400,000 | £16,000 | £1,333 |
| £500,000 | £20,000 | £1,667 |
| £750,000 | £30,000 | £2,500 |
| £1,000,000 | £40,000 | £3,333 |
Pot Needed for Target Income (4%)
| Target Income | Pot Needed |
|---|
| £10,000/year | £250,000 |
| £15,000/year | £375,000 |
| £20,000/year | £500,000 |
| £25,000/year | £625,000 |
| £30,000/year | £750,000 |
| £40,000/year | £1,000,000 |
Summary
| Key Principle | Guidance |
|---|
| Sustainable rate | 3-4% traditionally |
| Tax efficiency | Use 25% tax-free wisely |
| State Pension | Reduces drawdown need |
| Investment | Keep growing in retirement |
| Flexibility | Review and adjust |
| Professional advice | Recommended for large pots |
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