UK Pension Calculator

When you contribute to a pension, the government adds tax relief at your marginal rate. For a basic rate taxpayer, a £100 pension contribution only costs £80 because the pension provider claims back 20% from HMRC. Higher rate taxpayers can claim an additional 20% through their tax return, making the true cost just £60.

This makes pensions one of the most tax-efficient ways to save. If your employer offers salary sacrifice for pension contributions, you also save National Insurance (8% for employees), making it even cheaper. On a £100 salary sacrifice pension contribution as a basic rate taxpayer, the true cost to your take-home pay is just £72.

When you access your pension (from age 55, rising to 57 in 2028), you can usually take 25% of your total pot as a tax-free lump sum. The remaining 75% is then taxed as income when you withdraw it. For example, if your pension pot is £400,000, you could take £100,000 tax-free and draw income from the remaining £300,000.

Many people spread their withdrawals over several tax years to stay within the basic rate band, reducing the total tax they pay. You do not have to take the 25% all at once.

The 4% rule is a widely used guideline for retirement income. It suggests that if you withdraw 4% of your pension pot in the first year (adjusting for inflation each year after), your money should last at least 30 years.

For example, a pension pot of £500,000 would provide roughly £20,000 per year under this rule. Combined with the full State Pension of £11,502 per year, that gives a total retirement income of around £31,500. This calculator uses the 4% rule to estimate your retirement income.

All UK employers must automatically enrol eligible workers into a workplace pension. The minimum total contribution is 8% of qualifying earnings: 5% from you and 3% from your employer. You can opt out, but you would lose your employer's contribution, which is essentially free money.