Pension Drawdown Calculator

Flexi-access drawdown lets you take 25% of your pension pot as a tax-free Pension Commencement Lump Sum and then draw taxable income from the remaining 75% while the pot stays invested. The tax-free share is fixed at crystallisation, so on a £200,000 pot £50,000 comes out tax-free and £150,000 moves into the drawdown fund, where every later withdrawal is taxed as earned income at your marginal rate. Access to a defined contribution pension starts at 55, rising to 57 from April 2028.

Taking the lump sum and moving the rest into drawdown is only one of three routes. You can leave the pot uncrystallised and take Uncrystallised Funds Pension Lump Sums instead, where each payment is a quarter tax-free and three-quarters taxable, or hand the money to an insurer in exchange for an annuity. Drawdown buys flexibility at the cost of managing the investments yourself, while an annuity buys certainty and gives that flexibility up. However you take it, the tax-free element is capped at £268,275 across all your pensions.

Longevity projections weigh investment growth against the rate you are drawing. At a 4% withdrawal rate with 5% nominal growth and 0.5% charges, a pot typically lasts 30 years or more. Push the rate to 6% and the same pot may be exhausted inside 20 years. The 4% figure traces back to Bengen in 1994, who withdrew 4% of the starting pot and raised it with inflation each year. UK research from Cazalet and the PFS argues 3.5% is safer given lower bond yields and longer lifespans, which on a £400k pot is the difference between £16,000 and £14,000 a year.

Sequence-of-returns risk explains why two pensioners with the same average 7% return over 30 years can end up in very different places. A 20% fall in year one does far more damage than the same fall in year 29, because the early loser is selling units cheaply while also drawing income, and the pot never recovers the ground. Holding two or three years of withdrawals in cash avoids forced selling during a crash, trimming equity exposure as retirement approaches softens the swings, and annuitising part of the pot puts a floor under essential spending.

Income tax on drawdown stacks on top of everything else you receive, State Pension included. The first £12,570 of total income falls under the personal allowance, then 20% applies up to £50,270, 40% up to £125,140 and 45% above that, with the allowance tapering by £1 for every £2 earned over £100,000 to produce an effective 60% rate between £100,000 and £125,140. Since only a quarter of the pot escapes tax altogether, the pace of withdrawal matters as much as the total. Drawing £37,700 inside the basic-rate band costs £7,540, while emptying a pot quickly pushes the same money into far higher bands.

Whether to stay in drawdown or convert to an annuity is the other question these projections inform. Drawdown keeps the pension invested, lets income flex with need, and leaves whatever remains to your family, although from 6 April 2027 most unused pension funds and death benefits will count towards your estate for inheritance tax (anything left to a spouse or civil partner stays exempt), and if you die at 75 or over your beneficiaries also pay income tax on what they draw. An annuity pays a guaranteed income for life with no investment risk, and the best rates in September 2026 are around 7.5% to 8% at age 65 on a single-life level basis, though nothing passes on unless the policy is joint-life. Many retirees do both in sequence, drawing down through the active years of their 60s and 70s and buying an annuity from about 75, when rates are higher and decisions harder.