Retirement Drawdown Calculator

What is pension drawdown?

Pension drawdown is the act of leaving your pot invested in retirement and withdrawing what you need each year, rather than handing it over to an insurance company in exchange for a guaranteed lifetime income (an annuity). Since the 2015 UK pension freedoms, drawdown has become the dominant choice for most retirees. The first 25% of any pension pot is available tax-free; everything above that is taxed as income at your marginal rate at the time you withdraw it.

The calculator above doesn't distinguish between SIPP, workplace pension and ISA pots - it models the total invested capital and the gross withdrawal you take each year. For most planning purposes that's the right simplification because what matters is whether your money lasts, not which wrapper it came from.

Drawdown vs annuity

The two options have genuinely different shapes and both can be the right answer depending on what you're optimising for.

• Annuity: hand the pot to an insurer, get a guaranteed income for life. Removes longevity risk (you can't outlive an annuity) and sequence-of-returns risk. Loses flexibility - the money is gone and the rate is fixed at purchase. Today's annuity rates pay roughly 7% for a 65-year-old buying a level (non-inflation-linked) single-life annuity, dropping to around 5% for an RPI-linked equivalent.
• Drawdown: keep the pot invested and withdraw flexibly. Retains full control, full upside if markets do well, full risk of running out if they don't. Tax planning is meaningfully better than with an annuity because you control the timing and size of withdrawals.

The honest middle position: many retirees benefit from a partial annuity covering essentials (housing, food, utilities) so the floor income is guaranteed, with drawdown layered on top to fund discretionary spending and provide flexibility. The calculator models pure drawdown; if you're planning a hybrid, run it with the annuity-covered portion already excluded from both the pot and the annual withdrawal.

Why sequence of returns risk matters

The calculator assumes a smooth average return. In reality markets deliver returns in clumps - 25%, then -15%, then 10%, averaging the same long-run figure but not in a straight line. Sequence of returns risk is the term for what happens when the bad years arrive early.

Two retirees with identical 30-year average returns can end up in completely different places. The one who hits a 30% bear market in year 2 of retirement may run out of money a decade early. The one who hits the same bear market in year 22 typically does not, because by then the portfolio has grown enough that even a 30% drop leaves it well above the starting balance.

The practical defence is a 1 to 3-year cash buffer at the start of retirement so you can avoid selling stocks during a downturn. Some retirees use a "rising glide path" starting heavy in bonds and shifting toward equities over the first decade, which reduces early-year drawdowns at the cost of some long-run return. The Beyond the 4% Rule guide covers the strategies in depth.

How the State Pension extends pot longevity

The full new State Pension is around £12,000/year (2026/27) and starts at age 66, rising to 67 in 2028 and 68 later. For a retiree spending £30,000/year, the State Pension covers nearly 40% of total income from State Pension age onwards.

This dramatically extends pot longevity. A £700,000 pot starting drawdown at 60 might run for 25 years on a £30,000/year withdrawal at 5% real return. The same pot with a £12,000/year State Pension kicking in at 67 typically lasts indefinitely, because from age 67 onwards the portfolio only needs to fund £18,000/year - a 2.6% withdrawal rate on the same pot, well below any sustainable benchmark.

The catch: you need a full National Insurance record (usually 35 qualifying years) for the full State Pension. Anyone planning early retirement should check their State Pension forecast before committing to a stop-work date. Voluntary Class 3 NI contributions can plug gaps for around £900 per year of cover - usually the highest-return DIY pension top-up available in UK personal finance.

Frequently asked questions