The retirement savings calculator answers “how much do I need to save?” This tool answers the question that follows: “how long will the pot actually last once I start drawing on it?” The answer depends on how much is withdrawn each year, what the pot earns during drawdown, whether withdrawals rise with inflation, and whether the State Pension reduces the amount the personal pot needs to provide.

The tool models three drawdown strategies side by side, a fixed withdrawal, an inflation-adjusted withdrawal, and a percentage-of-pot approach, and shows when the pot runs out under each one. It also includes a State Pension offset, a tax-free lump sum toggle, and sustainability thresholds showing the maximum annual withdrawal the pot could sustain indefinitely. All figures are illustrative and depend on the inputs you provide.

How to use the retirement income calculator

The tool is designed to complement the retirement savings calculator, which models the accumulation phase. This tool models the drawdown phase: what happens once the pot is built and withdrawals begin. Using them together gives a complete picture of both sides of the retirement equation.

The three drawdown strategies compared

The fixed withdrawal strategy takes the same nominal amount each year regardless of what the pot does. It provides predictable income and is the simplest to plan around, but it ignores inflation: £20,000 per year buys less in year 20 than in year 1. Over a 25-year retirement at 2.5% inflation, the purchasing power of a fixed £20,000 withdrawal falls to approximately £11,000 in today’s terms. The pot lasts longer than inflation-adjusted withdrawals because the amount taken out does not increase, but the real value of the income declines steadily.

The inflation-adjusted strategy increases the withdrawal each year by the inflation rate, maintaining purchasing power throughout retirement. This is closer to how spending actually works: costs rise over time, and a retirement income that does not keep pace eventually falls short. The trade-off is that the pot depletes faster because withdrawals grow each year. The percentage-of-pot strategy withdraws a fixed percentage of the remaining balance each year. The pot technically never reaches zero because you are always taking a fraction of what remains, but income can decline significantly if returns are poor or the withdrawal percentage is high. This strategy is most useful for people who can tolerate variable income and want to avoid the risk of full depletion. The inflation erosion calculator shows how inflation affects purchasing power over long periods, which is relevant context for choosing between fixed and inflation-adjusted strategies.

Why the sequence of returns matters in drawdown

The tool applies a constant annual return, but real investment returns vary from year to year. In the accumulation phase, poor returns in the early years are eventually offset by later growth on new contributions. In drawdown, the dynamic reverses: poor returns in the early years, combined with ongoing withdrawals, reduce the pot to a level from which recovery becomes difficult even if later returns are strong. This is called sequence-of-returns risk, and it is the primary reason why drawdown projections at a constant return are optimistic compared with real-world outcomes.

A pot of £300,000 earning an average of 4% per year over 25 years produces a very different outcome depending on whether the returns in the first five years are positive or negative. If the pot suffers a 20% market decline in year one and recovers over the subsequent years to achieve the same 25-year average, the pot runs out several years earlier than if the same average return is achieved smoothly. The tool does not model this variability because it would require probabilistic modelling that goes beyond an illustrative calculator. For precise drawdown planning that accounts for sequence risk, investment volatility, and tax efficiency, regulated financial advice is the appropriate route. The figures in this tool are a useful starting point for understanding the scale of the challenge, not a substitute for a detailed retirement income plan.

The State Pension and personal drawdown

The full new State Pension for 2025/26 is approximately £11,502 per year for those with the qualifying National Insurance record of 35 years. It is paid from State Pension age, which is currently 66 and is scheduled to rise to 67 between 2026 and 2028, and to 68 at a later date. The State Pension is a guaranteed income that is not drawn from a personal pot: it continues for life and is uprated annually, typically in line with the triple lock (the highest of earnings growth, CPI inflation, or 2.5%).

For retirement income planning, the State Pension’s main effect is to reduce the amount the personal pot needs to provide. If the target retirement income is £22,000 and the State Pension provides £11,502, the personal pot only needs to generate £10,498 per year. This nearly halves the drawdown requirement and can extend the pot life by many years, particularly for smaller pots where the withdrawal rate without the State Pension would be unsustainably high. The tool’s State Pension toggle shows this effect directly: the additional years the pot lasts can be substantial. Your actual State Pension entitlement depends on your National Insurance record: the government’s Check Your State Pension forecast service on GOV.UK provides a personalised projection.

The 25% tax-free lump sum decision

Under current rules, up to 25% of a defined contribution pension pot can be withdrawn as a tax-free lump sum (subject to the Lump Sum Allowance, which is £268,275 for 2025/26). The remaining 75% enters drawdown, and all subsequent withdrawals are taxed as income. Taking the lump sum reduces the pot available for drawdown, which means the pot lasts fewer years at any given withdrawal rate. Whether this trade-off is worthwhile depends on what the lump sum is used for and whether the tax-free treatment produces a benefit that outweighs the shorter pot life.

Common uses for the tax-free lump sum include paying off a remaining mortgage, clearing other debt, or funding a specific large expenditure at the start of retirement. Each of these has a financial logic: paying off a mortgage at a given interest rate with tax-free funds avoids ongoing interest payments that would otherwise need to come from taxable drawdown income. The tool shows the lump sum amount, the remaining pot, and the effect on pot duration under the fixed strategy, so the cost in years of taking the lump sum is visible. The decision about whether to take it, and when, is one that benefits from regulated financial advice because the interaction between the lump sum, income tax on subsequent withdrawals, and the remaining pot duration is specific to individual circumstances.

Sustainability thresholds and the withdrawal rate benchmark

The sustainability threshold is the maximum annual withdrawal at which the pot never runs out, assuming a constant return. For a fixed nominal withdrawal, this is simply the pot multiplied by the return rate: a £300,000 pot at 4% return can sustain a fixed withdrawal of £12,000 per year indefinitely, because the return replaces what is withdrawn. For an inflation-adjusted withdrawal, the sustainable threshold is lower: the pot multiplied by (return minus inflation). At 4% return and 2.5% inflation, the sustainable inflation-adjusted withdrawal is 1.5% of the pot, or £4,500 per year on a £300,000 pot.

The widely cited “4% rule” in retirement planning literature originates from US research (the Trinity Study) suggesting that a 4% initial withdrawal rate, adjusted for inflation, had a high probability of lasting 30 years across historical market conditions. This tool does not use the 4% rule as a fixed benchmark because it is based on US market data and specific assumptions about portfolio composition, and the appropriate withdrawal rate depends on individual circumstances including pot size, income needs, other income sources, and risk tolerance. The sustainability panel instead shows the mathematical threshold for the specific return and inflation assumptions entered, which is more precise than applying a generalised rule. If the target withdrawal is above the sustainability threshold, the pot will eventually be depleted: the strategy cards show when. The retirement savings calculator can help determine what pot size would make the target withdrawal sustainable.

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Frequently asked questions

What is a safe withdrawal rate and does this tool use one?

The concept of a “safe withdrawal rate” comes from retirement planning research, most notably the Trinity Study, which analysed US market data and concluded that a 4% initial withdrawal rate, adjusted annually for inflation, had a high historical probability of lasting at least 30 years. The 4% figure has become widely cited as a rule of thumb, but it is based on specific assumptions about US equity and bond returns, a 30-year retirement period, and a particular portfolio composition that may not apply to every retiree.

This tool does not apply a fixed safe withdrawal rate. Instead, it calculates the sustainability threshold for the specific return and inflation assumptions you enter, and shows how long the pot lasts at the withdrawal rate you choose. This is more precise than applying a generalised percentage because the sustainable rate depends on the actual return earned and the inflation experienced, both of which vary. The sustainability panel shows the maximum annual withdrawal that keeps the pot indefinitely at your assumptions, which serves as the equivalent benchmark without importing assumptions from a different market and time period.

What investment return should I assume during drawdown?

The appropriate assumed return depends on how the pot is invested during drawdown. Pots held in drawdown are typically invested in a mix of assets, but the mix is often more conservative than during the accumulation phase because the time horizon is shorter and the need for regular withdrawals reduces the capacity to ride out market downturns. A balanced portfolio of equities and bonds might reasonably be modelled at 3 to 5% per year for illustrative purposes. A more conservative allocation with a higher bond weighting might use 2 to 3%. A more aggressive allocation with a higher equity weighting might use 5 to 7%, but with higher short-term variability.

Running the tool at multiple return assumptions (for example 3%, 4%, and 5%) gives a range of outcomes rather than a single figure, which is more honest about the uncertainty. The return entered should be net of investment management charges, platform fees, and adviser fees where applicable, since these reduce the effective return. A gross return of 5% with annual charges of 1% produces an effective return of 4%. The tool does not deduct charges from the return, so subtracting estimated annual charges from the gross assumption before entering it produces a more realistic projection.

Should I take the 25% tax-free lump sum?

There is no universal answer. The 25% lump sum is tax-free, which means it is the most tax-efficient way to extract cash from a pension. If the lump sum would be used to pay off a mortgage or other debt, the interest saving from clearing the debt may exceed the cost of having a smaller pot in drawdown, particularly if the remaining pot is large enough to sustain the required income. If the lump sum would sit in a savings account earning less than the drawdown return, the opportunity cost of taking it out is the higher return it would have earned inside the pension.

The tool shows the effect of taking the lump sum in two ways: the remaining pot entering drawdown and the number of years shorter the pot lasts under the fixed strategy. This gives a concrete measure of the cost in pot duration terms. The decision about whether to take it, how much to take (it does not have to be the full 25%), and when to take it is one of the most consequential decisions in retirement planning. The interaction between the lump sum, subsequent income tax on drawdown withdrawals, and the impact on means-tested benefits is specific to individual circumstances and is an area where regulated financial advice is particularly valuable.

How does tax affect the income I actually receive from drawdown?

Pension withdrawals above the 25% tax-free lump sum are taxed as income. If the total of pension withdrawals, State Pension, and any other income exceeds the Personal Allowance (£12,570 for 2025/26), income tax is due on the excess at the applicable rate. For someone with a State Pension of £11,502 and pension drawdown of £10,000, the total income is £21,502. After the Personal Allowance, the taxable amount is £8,932, taxed at 20% (basic rate), giving approximately £1,786 in tax. The after-tax drawdown income is therefore around £8,214 rather than £10,000.

The tool displays gross withdrawal figures and does not deduct income tax, because the tax position depends on total income from all sources, the applicable tax code, and any other reliefs or allowances that may apply. The tax context note in the tool explains this. For planning purposes, applying the relevant marginal tax rate to the withdrawal above the Personal Allowance gives an approximate after-tax figure. The take-home pay calculator can be used as a rough guide to the income tax calculation, though it is designed for employment income rather than pension drawdown and does not model the specific tax treatment of pension withdrawals in full.

What happens if I withdraw more than the sustainable rate?

If the annual withdrawal exceeds the sustainable threshold, the pot will eventually be depleted. The fixed strategy card shows when: the number of years until the pot reaches zero. Withdrawing above the sustainable rate is not inherently wrong, because not everyone needs the pot to last indefinitely. A retiree who starts drawdown at 67 and expects the pot to need to last 25 years may be comfortable with a withdrawal rate that depletes it by age 92, provided other income sources (primarily the State Pension) continue beyond that point.

The risk of withdrawing above the sustainable rate is longevity risk: the possibility of outliving the pot. If the pot is depleted and the retiree is still alive, income drops to whatever the State Pension and any other guaranteed income provides, which may be significantly less than the previous drawdown income. The inflation-adjusted strategy depletes faster than the fixed strategy for the same starting withdrawal, which means the longevity risk is higher. Testing the withdrawal rate at both the chosen return assumption and a lower one (to account for poor returns) gives a more conservative view of whether the pot is likely to last. For precise modelling of longevity risk and drawdown sustainability, regulated financial advice using actuarial assumptions is the appropriate route.

This tool is for illustrative purposes only and does not constitute financial, tax, or pension advice. Projections assume a constant annual investment return and do not model the year-to-year variability of real market returns or the sequence-of-returns risk that affects drawdown outcomes. The State Pension figure is based on the 2025/26 illustrative rate for the full new State Pension and is subject to change. Actual State Pension entitlement depends on individual National Insurance records. The 25% tax-free lump sum is subject to the Lump Sum Allowance and may not apply in full to all pension arrangements. Income tax on pension withdrawals depends on total income and individual tax circumstances. Pension access age is currently 55, rising to 57 in 2028 under current legislation. Tax rules, allowances, and pension regulations are subject to change. Past investment performance is not a guide to future returns. For personalised retirement income planning, seek advice from a regulated financial adviser. Actual outcomes will depend on your individual circumstances.