Pension Drawdown Calculator
Draw down your pension: tax-free cash (£268,275 allowance), year-1 withdrawal and tax, net income, how long the pot lasts, the sustainable withdrawal rate, upfront vs phased tax-free cash, the emergency-tax warning and the £10,000 MPAA.
| Tax-free lump sum available | — |
|---|---|
| Pot left in drawdown | — |
| Year-1 withdrawal and tax | — |
| Net income in year 1 (pension + other, after tax) | — |
| Pot lasts until | — |
| Sustainable withdrawal (pot lasts to the planned age) | — |
| Total tax paid over retirement | — |
| Phased vs upfront tax-free cash | — |
| Emergency-tax warning on the first withdrawal | — |
| Money purchase annual allowance | — |
In short
In flexi-access drawdown you can take 25% of your pension tax-free (up to the £268,275 lump sum allowance) at once or gradually, and the rest is taxed as income in the year withdrawn at 20/40/45% on top of other income, so keeping total income under £50,270 saves tax. A withdrawal of about 3.5–4% of the pot a year, rising with inflation, has historically lasted 30 years; first withdrawals are often emergency-taxed and reclaimable, and taking taxable income triggers the £10,000 money purchase annual allowance.
Who this is for: UK retirees over 55 planning how to draw a defined contribution pension.
Drawing your pension tax-efficiently
- Tax-free cash: 25% of each pension, up to £268,275 in total (the lump sum allowance). Take it all at once, or gradually — phased withdrawals keep the rest invested and can spread the tax-free element over many years.
- Taxable withdrawals are added to your other income: keep total income under £50,270 to stay at 20%, and under £100,000 to keep the personal allowance. State Pension (about £12,000 from 2026/27) uses most of the personal allowance from 67.
- Sustainable rate: around 3.5–4% of the pot rising with inflation historically lasts 30 years in a balanced portfolio; the calculator solves the rate for your assumptions.
- Sequence risk: poor returns in the first few years do the most damage — holding 2–3 years of income in cash and varying withdrawals helps.
- MPAA: flexibly accessing taxable income cuts your annual allowance to £10,000 — relevant if you keep working.
- Emergency tax: first withdrawals are often taxed on a Month-1 basis; reclaim promptly.
See also: Pension Tax Relief Calculator 2026/27.
Assumptions
- Upfront: 25% (max £268,275) taken at the start, drawdown pot = 75%; phased: 25% of each withdrawal tax-free until the allowance is used.
- Withdrawals rise with inflation; pot grows at the return after each withdrawal; tax = income tax on other income + taxable withdrawal minus tax on other income.
- Sustainable withdrawal solved by bisection so the pot lasts to the planned age; emergency tax approximated as Month-1 treatment of the first taxable withdrawal.
Worked example
Tax-free cash £100,000 leaves £300,000 in drawdown. Year 1: £20,000 withdrawn is all taxable on top of £12,000 of other income → £3,886 of tax, net income about £28,114. At 4% growth with withdrawals rising 2.5% a year the drawdown pot runs out at about age 77; a sustainable withdrawal to 90 is about £12,600 a year. Over the plan about £83,300 of tax is paid on £510,800 drawn (16.3%). Taking the tax-free cash gradually instead (phased) keeps the £100,000 invested, so the pot lasts to about 84 — with tax at about 17.1% of the money drawn, because more of the withdrawals are taxable income.
Frequently asked questions
How much of my pension can I take tax-free?
25% of each pension, capped at £268,275 across all your pensions (the lump sum allowance) — more if you have protection from the old lifetime allowance.
Is pension drawdown taxed?
Yes — withdrawals beyond the tax-free element are taxed as income at 20/40/45% in the year taken, so timing withdrawals around the £12,570 and £50,270 thresholds matters.
How much can I safely withdraw each year?
Historically about 3.5–4% of the starting pot, rising with inflation, for a 30-year retirement; more if you retire later or hold more equities, less in a poor first decade.
What is the money purchase annual allowance?
After you take taxable income flexibly from a defined contribution pension, your annual allowance for new contributions drops from £60,000 to £10,000 with no carry forward.
Should I take my 25% tax-free cash all at once?
Only if you need it — taking it gradually keeps more invested and spreads the tax-free element, which the comparison shows.
What happens to my pension when I die?
Beneficiaries inherit it tax-free if you die before 75, or pay income tax on withdrawals after; from April 2027 unused funds are expected to count for inheritance tax.
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