Calculators
Pension drawdown calculator
How long your pot could last at the income you want, and the income it could sustain if it has to see you through to 95 or 100.
What this means
How it works
How long will my pension last?
In drawdown your pot does two opposite things at once. It grows, with whatever the investments return, and it shrinks, with every withdrawal. Whether it lasts depends on the balance between the two, and on how long you live.
The calculator runs your pot forward a year at a time. Each year it takes out the income you have asked for, increased in line with inflation, then applies growth after charges to what is left. The chart shows the result in today's money and marks the age at which, on these assumptions, the money would be gone.
Three things the straight line hides
- Markets do not move in straight lines. A 20% fall in the first two years of retirement does far more damage than the same fall at 85, because there is less time and less money left to recover.
- Spending is not flat either. Many people spend more in the first active decade of retirement, less in the middle, and more again if care is needed.
- You may live longer than you expect. Official projections suggest roughly one in four people aged 65 today will reach their early nineties. A plan that stops at 85 is a plan that fails for a great many people.
Making drawdown work
The plans that hold up tend to share a few features: a cash reserve so that investments are not sold in a falling market, a withdrawal that can flex down in bad years, guaranteed income from the State Pension or an annuity covering the essentials, and a tax plan that uses allowances across pensions, ISAs and other savings. An adviser builds those around your figures and revisits them each year.
Questions
Drawdown questions
What is pension drawdown?
Drawdown keeps your pension invested while you take money from it as and when you choose. You can normally take up to 25% tax-free and the rest is taxed as income when withdrawn. Unlike an annuity, the income is not guaranteed and the pot can run out.
What is a safe withdrawal rate?
There is no single safe figure. A commonly quoted rule of thumb is around 4% of the starting pot, rising with inflation, but research for UK investors often points lower, and the right figure depends on your age, your investments, your other income and how much flexibility you have to cut back in bad years.
Why does the order of returns matter?
If markets fall early in retirement while you are making withdrawals, you sell more of the pot to raise the same income and there is less left to recover. The same average return can produce very different outcomes depending on when the bad years fall. This is known as sequence risk, and it is the main reason drawdown plans are reviewed regularly.
How is drawdown income taxed?
After any tax-free cash, withdrawals are added to your other income for the year and taxed at your usual rates. Taking a large amount in one tax year can push you into a higher band, so spreading withdrawals often saves tax. Once you take taxable income flexibly, the amount you can pay into defined contribution pensions falls to £10,000 a year.
What happens to the pot when I die?
Whatever is left can pass to the people you nominate. If you die before 75 they can usually draw it free of income tax; after 75 they pay income tax on withdrawals. From 6 April 2027 most unused pension funds will also count towards your estate for inheritance tax.
Drawdown or annuity?
It is not either or. Many people use an annuity to cover essential bills with a guaranteed income and keep the rest in drawdown for flexibility. With annuity rates far higher than they were a few years ago, the comparison is worth making properly.
A withdrawal plan is only as good as its last review.
Book a complimentary video consultation with an FCA-regulated adviser who specialises in retirement income, and test your plan against your own figures. No obligation.