Pension Drawdown Calculator

How pension drawdown works

Flexi-access drawdown lets you keep your pension pot invested while you take an income from it, rather than swapping it for a fixed annuity. You can usually take 25% of the pot tax-free — capped by the £268,275 lump sum allowance — and the rest stays invested, with every later withdrawal taxed as income at your marginal rate. The calculator above runs a simple year-by-year projection: it grows the remaining pot at your chosen rate, subtracts your income each year, and counts how long the money lasts.

Tax on drawdown withdrawals

Only the 25% is tax-free. Everything else you draw is added to your income for the year and taxed at the normal 2026/27 rates, so the timing and size of withdrawals matters enormously. Remember the new State Pension of £241.30 a week (£12,547.60 a year) already uses up almost all of your £12,570 personal allowance once it starts — from that point, most drawdown income is taxed from the first pound.

These thresholds are frozen until 2031, so a fixed withdrawal that looks basic-rate today can creep into higher bands as other income rises. A large one-off withdrawal can push you into 40% tax in a single year when spreading it over two tax years would not.

What's a safe withdrawal rate?

The often-quoted "4% rule" — drawing about 4% of the pot each year — is a guideline, not a guarantee. It comes from historical studies, and poor investment returns in the early years of retirement (so-called sequence risk) can drain a pot much faster than the averages suggest. Our example above draws 6.4% of the invested pot, which is why it runs out in about 26 years rather than lasting indefinitely. Use our compound interest calculator to see how growth assumptions change the picture, and review your withdrawal rate every year rather than setting it once.

The £10,000 MPAA trap

The moment you flexibly take taxable income from your pot (anything beyond the tax-free cash), the Money Purchase Annual Allowance (MPAA) kicks in and caps future tax-relieved contributions to money purchase pensions at £10,000 a year. If you plan to keep working and paying in — check what you contribute with our pension contribution calculator — think twice before triggering it. Taking only the tax-free lump sum does not trigger the MPAA.

Drawdown or annuity?

Drawdown is flexible: you control the income, the pot can keep growing, and anything left can be passed on. But it can also run out, and its value moves with markets. An annuity is the opposite trade — a guaranteed income for life, with no flexibility once bought. Many retirees blend the two: enough guaranteed income (State Pension plus an annuity) to cover essentials, with drawdown for the rest. You can access defined contribution pensions from the normal minimum pension age of 55, rising to 57 from April 2028. The rules are set out on GOV.UK, and if your pot sits in cash while you decide, compare rates with our savings interest calculator.