Pension Drawdown Calculator UK
Model how long your SIPP or pension pot will last in flexible drawdown, including the State Pension.
Your Pension Details
Model your pension drawdown strategy. Include your SIPP, workplace pension, and any other defined contribution pension pots.
Min pension access age: 57 (from 2028)
Total annual income needed from pension
5% is conservative for a balanced portfolio
Full State Pension is £11,502/year (2025/26)
What Is Pension Drawdown?
Pension drawdown (flexible drawdown) allows you to keep your pension pot invested in the stock market while taking a flexible income from it. Unlike an annuity — which converts your pot into a guaranteed income for life — drawdown keeps your capital working, allows you to vary your income year by year, and lets you pass any remaining pot to your beneficiaries.
For FIRE retirees, drawdown is almost universally preferred over annuity because it preserves flexibility (crucial in early retirement where needs change significantly over decades) and upside potential (a pot invested in equities should grow significantly over a 30–40 year retirement).
The Tax-Free Cash Decision
When you start drawdown, you can take up to 25% of your pension pot as a tax-free lump sum, capped at £268,275 (the lump sum allowance introduced following the abolition of the lifetime allowance in April 2024). The remaining 75% stays invested and is taxed as income when withdrawn.
For FIRE retirees with both ISA and SIPP savings, a common strategy is to take the tax-free lump sum and invest it in the ISA (if you have remaining allowance) or use it to fund early retirement expenses, while letting the remaining SIPP pot compound tax-free inside the pension.
Sequence of Returns Risk
The biggest risk in pension drawdown is sequence of returns risk — the danger that poor investment returns early in retirement permanently damage your pot before it can recover. A market crash in year 2 of retirement forces you to sell more units at lower prices to fund the same income, leaving fewer units to benefit from the eventual recovery.
UK FIRE retirees manage this risk through: holding 1–2 years of expenses in cash (avoiding forced sales during crashes), using flexible withdrawal rates (reducing spending during downturns), and keeping a globally diversified equity portfolio that has historically recovered from every crash.
Frequently Asked Questions
What is pension drawdown?
Flexible drawdown keeps your pension pot invested while allowing you to take variable income. It is the preferred choice for FIRE retirees over annuities, which give a fixed income for life but no capital flexibility or inheritance value.
How much can I take tax-free from my pension?
25% of your pension pot, up to a maximum of £268,275. The rest is taxed as income when withdrawn. Many people spread the tax-free cash across multiple withdrawals rather than taking it all at once.
What is a safe withdrawal rate for UK pension drawdown?
3–4% of portfolio value per year is the standard range. 4% (the classic rule) has historically sustained 30 years in most market scenarios. 3.5% is more conservative and better reflects UK-specific factors. Flexible withdrawal strategies (reducing spending during downturns) improve sustainability significantly.
What happens to my drawdown pot when I die?
If you die before 75: passed to beneficiaries completely tax-free. If you die at 75 or over: beneficiaries pay income tax at their marginal rate on withdrawals. Pension pots do not currently form part of your estate for inheritance tax purposes — though this may change from 2027 under proposed government reforms.
This calculator is for illustrative purposes only and does not constitute financial advice. Pension rules, tax-free cash limits, and drawdown regulations can change. The minimum pension access age is rising to 57 in 2028. Investment returns are not guaranteed. For advice specific to your pension arrangements and tax situation, consult a qualified financial adviser or pension specialist.
Related Calculators
- Safe Withdrawal Rate Calculator — model your withdrawal rate strategy
- UK State Pension Calculator — see how State Pension supplements your drawdown
- ISA vs SIPP Calculator UK — optimise your wrapper strategy
- All UK FIRE Calculators
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