Pension Calculator UK: Pot, Lump Sum & Drawdown

How the pension calculator works

The calculator projects a defined contribution pension, the kind almost every workplace pension and personal pension (SIPP) is today. Your pot grows from four sources:

1. Your contributions, as a percentage of your pay. We treat this as the gross amount going into the pension, which is how most payslips and scheme statements show it.
2. Your employer’s contributions, a fixed percentage, plus an optional match: some employers add more when you pay more, up to a cap.
3. Tax relief from the government on anything you pay into a personal pension: we add 20% basic-rate relief at source.
4. Investment growth, after the annual charges your provider and funds take.

Each month we add contributions, apply growth, and take off charges. Each year your salary can rise by the pay-rise rate you choose. When you reach your retirement age we work out the tax-free lump sum and a level drawdown income from what’s left, and show everything in today’s money too, using your inflation assumption.

Worked example

Take someone aged 30 earning £35,000 with a £10,000 pot. They pay 5% and their employer 3% of qualifying earnings (pay between £6,240 and £50,270). We assume 5% growth, 0.5% charges, 2.5% pay rises and 2% inflation, retiring at 67.

At 67	Amount
Pension pot	£335,903
In today’s money	£161,439
Their contributions	£75,134
Employer contributions	£45,082
Investment growth	£229,286
Charges paid	£23,599
Tax-free lump sum (25%)	£83,976
Drawdown income to age 90	£16,095 a year

That drawdown income is worth about £7,736 a year in today’s money. On top of it comes the State Pension, which is £12,548 a year at the full new rate today if you have 35 qualifying years of National Insurance.

Three changes that make a big difference

• Pay 3% more. Raising their own contribution from 5% to 8% gives a pot of £442,918, £107,014 more.
• Charges. At 1.5% a year instead of 0.5%, the pot is £264,409, which is £71,494 less. Charges compound just like growth, so a 1% difference adds up over decades.
• Starting later. Someone with the same pay and pot who is 40, not 30, ends up with £188,237.

What contributions really cost you

Pension contributions get tax relief, so they cost you less than the amount that goes in. How much less depends on how your scheme takes them:

• Relief at source: you pay 80% and the provider claims 20% from HMRC. Higher-rate taxpayers claim the extra relief through Self Assessment or by asking HMRC to change their tax code. The calculator includes it, because extending your basic-rate band has the same effect.
• Net pay: the contribution comes off your pay before tax, so you get relief at your top rate automatically.
• Salary sacrifice: you give up salary and your employer pays it in. You save National Insurance as well as Income Tax.

On a £60,000 salary, a 5% contribution of £3,000 a year costs about £1,800 in take-home pay through relief at source, or £1,740 through salary sacrifice. The “Costs you now” figure uses our take-home pay calculator engine, so it reflects your real tax band and region.

Lump sum and drawdown

From the minimum pension age you can usually take 25% of your pot tax-free, up to the lump sum allowance of £268,275 across all your pensions. The calculator assumes you take it all at the start of retirement.

The remaining pot is drawn as a level income that runs out at the age you choose, while it keeps growing at your retirement growth rate after charges. It uses the standard formula: income = pot × r ÷ (1 − (1 + r)⁻ⁿ), where r is the net growth rate and n is the number of years. Drawdown income is taxable, like a salary. You could buy an annuity instead, which pays a guaranteed income for life.

Limits and assumptions

• Growth is steady every year. Real investments rise and fall, so treat this as an illustration, not a forecast.
• The annual allowance is £60,000. We warn you if your contributions go above it.
• Qualifying earnings limits stay at today’s level.
• We don’t model defined benefit (final salary) pensions, annuity rates or inheritance.

To see how saving in an ISA compares, try the savings calculator. To find room in your spending for bigger contributions, use the budget planner. For free, impartial guidance at 50 or over, you can book a Pension Wise appointment through MoneyHelper.