Step 1: Enter Your Personal Details

Start by entering your current age and when you plan to retire. The State Pension age in the UK is currently 66, rising to 67 between 2026 and 2028. However, you can access most private pensions from age 55 (rising to 57 in 2028).

Input your current annual salary and the income you’d like in retirement. As a general rule, you’ll need around 60-70% of your pre-retirement income to maintain your lifestyle.

Step 2: Add Your Pension Details

Enter the current value of all your pension pots combined. If you have multiple pensions, add them together. Next, include your monthly contributions and any employer contributions you receive.

Most workplace pensions in the UK require minimum contributions of 5% from employees and 3% from employers, though many people contribute more to boost their retirement savings.

Step 3: Review the Assumptions

The calculator uses industry-standard assumptions for growth rates. A moderate growth rate of 5% per year is typical for balanced pension investments. Conservative investors might prefer 2%, whilst those comfortable with higher risk might expect 8%.

Annual charges of 0.75% are standard for many pension schemes, though some low-cost providers charge less. Inflation is assumed at 2% based on the Bank of England’s target.

Step 4: Review Your Results

The calculator shows your projected pension pot at retirement, including the 25% tax-free lump sum you can take. It then displays various income options including drawdown, annuity purchase, and your potential income gap.

Pension Drawdown

With drawdown, you leave your pension invested and withdraw money as needed. The calculator assumes a sustainable withdrawal rate of 4% per year, which research suggests can last throughout retirement.

Benefits include flexibility to adjust your income and the potential for continued growth. However, your pot could run out if markets perform poorly or you withdraw too much.

Annuity Purchase

An annuity provides guaranteed income for life in exchange for your pension pot. Current rates mean £100,000 buys approximately £5,000-6,000 per year for a 66-year-old, though rates vary based on age, health, and whether you choose features like inflation protection.

Annuities offer security but lack flexibility. Once purchased, you typically cannot change or cancel them.

Mix of Options

Many retirees use a combination: taking the 25% tax-free lump sum, buying an annuity to cover essential expenses, and keeping the remainder in drawdown for flexibility.

The full new State Pension is currently £221.20 per week (£11,502.60 per year for 2025/26). To qualify for the full amount, you need 35 qualifying years of National Insurance contributions.

You can check your State Pension forecast and when you’ll receive it by using the government’s online service. Remember that State Pension alone is often insufficient for a comfortable retirement, making private pension savings essential.

State Pension age is gradually increasing. It’s currently 66 for everyone and will rise to 67 between 2026-2028. Further increases to 68 are planned, though the exact timing remains under review.

The Pensions and Lifetime Savings Association (PLSA) defines three retirement living standards to help you plan:

• Minimum: £14,400/year for singles, £22,400/year for couples – covers basic needs with little discretionary spending
• Moderate: £31,300/year for singles, £43,100/year for couples – includes some luxuries like a week’s holiday in Europe and regular leisure activities
• Comfortable: £43,100/year for singles, £59,000/year for couples – allows for more frequent holidays, car replacement, and regular leisure activities

These figures assume you own your home outright. If you have a mortgage or rent to pay, you’ll need considerably more.

You can take 25% of your pension pot as a tax-free lump sum when you retire. The remainder is subject to income tax when you withdraw it, just like regular income.

Your Personal Allowance (£12,570 for 2025/26) means you can receive this much income tax-free each year. Income above this is taxed at 20% (basic rate), 40% (higher rate), or 45% (additional rate).

The State Pension counts as taxable income, so if you receive the full State Pension plus other income, you may exceed the Personal Allowance and pay tax.