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Simplified: level growth, level withdrawals, no inflation increases, charges or tax. Real returns arrive unevenly, and poor early years deplete pots faster than averages suggest (sequence risk). 25% of withdrawals are typically tax-free with the rest taxable. A guide, not financial advice; Pension Wise offers free guidance from age 50.
What The Pension Drawdown Calculator Works Out
- Pot lasts: the number of years a pot survives when it grows at the stated rate and a level income is withdrawn at the end of each year, annuity maths in reverse. A GBP 300,000 pot growing at 5% supports GBP 15,000 a year indefinitely (withdrawals matching growth), while GBP 20,000 a year exhausts it in about 28 years, and each extra thousand of income shortens the runway disproportionately.
- Withdrawal rate: income taken divided by the pot. The famous 4% rule comes from US modelling of 30-year retirements; UK guidance treats 3% to 4% as the commonly cited sustainable zone once fees and UK return expectations enter, so the card flags anything above 4.5%.
- Sustainable income guide: 4% of the starting pot, a sensible opening bid rather than a law. Sequence risk means two retirees with identical average returns fare very differently if one meets the bad years first, so cash buffers and cutting withdrawals after bad years outperform a fixed income from a falling pot.
- Increase income each year (advanced): raises the withdrawal annually to keep pace with inflation, which is what the original 4% rule assumed. A 2.5% annual increase can cut several years off how long the pot lasts.
- Annual charges (advanced): deducted from the growth rate. Charges compound the same way growth does, and a percentage point of fees is roughly a quarter of the 4% rule.
- Money runs out at age (advanced): your starting age plus the years the pot lasts, compared with the number of years you need the income to cover. The State Pension from 66 or 67 provides a guaranteed floor underneath.
- Income the pot could support (advanced): the income, level or rising at your chosen rate, that would exhaust the pot exactly at the end of the target period, so you can see how much more or less than your planned figure the pot can afford.
- Pot remaining (advanced): what is left at the end of the target period in future money, which can normally pass to beneficiaries. The table underneath shows the withdrawal and the year-end pot at five-year intervals.
- Income tax on withdrawals (advanced): 25% of each withdrawal can be taken tax free (UFPLS), with the rest taxed as income on top of any other taxable income such as the State Pension, using England, Wales and Northern Ireland bands. The first taxable pound also triggers the money purchase annual allowance, cutting future contributions to GBP 10,000 a year.
Further reading: MoneyHelper: Pension Wise.