Pension Drawdown Calculator
How it works
Each year we deduct your income from the pot, grow the remainder by your assumed return, and increase next year's income by inflation. The pot lasts until it hits zero.
The 'safe withdrawal rate' rule of thumb (3.5–4% rising with inflation) is based on US historical data. UK research suggests 3% may be safer for early retirees aiming for 30+ years.
Worked example
£300,000 pot, drawing £15,000/year, 4% growth, 2.5% inflation:
- Initial withdrawal: 5% of pot
- Real return: 1.5%
- Pot runs out around year 23 — at risk of outliving the money
Who should use this
- •Anyone over 55 with a Defined Contribution pension
- •People considering flexi-access drawdown vs annuity
- •Early retirees planning a 30+ year horizon
Common mistakes
- ×Withdrawing too much in early years (sequence-of-returns risk)
- ×Forgetting Income Tax — withdrawals above 25% tax-free count as income
- ×Ignoring the Money Purchase Annual Allowance (MPAA) — drops contribution limit to £10k once you flexibly access
- ×Holding the pot in cash and losing real value to inflation
Frequently asked questions
What is the 'safe withdrawal rate'?▾
Around 3.5-4% of the pot in year one, rising with inflation. UK research suggests 3% for very long retirements.
Is drawdown taxed?▾
Yes — 25% can be taken tax-free, the rest is taxed as income at your marginal rate.
Can I run out of money in drawdown?▾
Yes. Unlike an annuity, drawdown carries longevity and investment risk.
What is MPAA?▾
The Money Purchase Annual Allowance — once you flexibly access a DC pension, your future contribution limit drops from £60k to £10k/year.
Can I switch drawdown to an annuity later?▾
Yes. Many retirees use drawdown early then buy an annuity in their 70s when annuity rates are higher.