Figures are illustrative only, ignore charges and tax, and are not a forecast or personal recommendation.
Once a pension pot has been built up, the next question is how much income it could realistically provide each year in retirement. This calculator applies a chosen annual withdrawal rate to your pension pot to produce an illustrative annual and monthly income figure — a starting point for retirement income planning, not a guarantee of what you'll actually receive.
What is a "withdrawal rate"?
A withdrawal rate is the percentage of your pension pot you draw out each year. The commonly cited "4% rule" comes from historical research (originally US-based) suggesting that withdrawing around 4% of a diversified portfolio in the first year of retirement, then adjusting that amount for inflation each subsequent year, gave a high probability of the pot lasting at least 30 years without running out, based on historical market returns. It's a useful reference point rather than a rule that guarantees success — actual safe withdrawal rates depend on market returns during your specific retirement, how the pot is invested, and how long you live.
How this calculator works
It multiplies your entered pot size by the withdrawal rate percentage to give an annual income figure, then divides by 12 for a monthly equivalent. It does not model the pot continuing to grow or shrink over a multi-year retirement, nor does it adjust for inflation year to year — it's a single-point illustration of what a given withdrawal rate produces from a given pot size today. For a fuller comparison between drawing an income this way (drawdown) versus converting the pot to a guaranteed income (an annuity), see our guide to drawdown versus annuity.
Worked example
A £300,000 pension pot at a 4% withdrawal rate produces an illustrative £12,000 a year, or £1,000 a month, before tax. Increase the withdrawal rate to 5% and the monthly figure rises to roughly £1,250 — but a higher withdrawal rate also increases the risk of the pot running out earlier, particularly if markets perform poorly in the early years of retirement (a risk known as "sequence of returns risk").
Don't forget the State Pension and tax
This calculator only projects income from the pot you enter — it doesn't add the UK State Pension, which most people become eligible for from State Pension age and which provides a separate, inflation-linked income on top. It also doesn't account for income tax: pension withdrawals (beyond the 25% tax-free lump sum most people can take) are generally taxed as income, so the after-tax amount you actually receive will typically be lower than the figures shown here, depending on your total income and tax band.
Frequently asked questions
Is 4% always a safe withdrawal rate?
No — it's a historical rule of thumb based on past market data and specific assumptions (including a particular portfolio mix and a 30-year time horizon), not a guarantee. Many retirees and advisers now consider a flexible approach, adjusting withdrawals based on how investments perform, to be more robust than a fixed percentage.
How did you build up the pot this calculator assumes?
Use our Pension Growth Calculator to project how a current pension value plus ongoing contributions could grow to a given pot size by your target retirement age.
Should I take income at a fixed percentage or a fixed amount?
Both approaches are used in practice. A fixed percentage of the current pot value automatically reduces income after a bad investment year (helping the pot last longer) but means your income varies; a fixed amount is more predictable but risks depleting the pot faster in poor markets.
What about inflation eating into a fixed income?
A flat withdrawal amount that never increases will buy progressively less over a long retirement — see our Inflation Erosion Calculator to see how much purchasing power a fixed sum loses over a typical retirement length.
Is this the same as an annuity income?
No — an annuity provides a guaranteed income for life (or a set term) in exchange for some or all of your pot, priced by an insurer, and is a different, typically more predictable, approach from managing your own drawdown withdrawal rate.
Common mistakes when planning pension income
A frequent mistake is applying a flat withdrawal rate without considering how investment returns in the first few years of retirement can disproportionately affect how long a pot lasts. Withdrawing a fixed percentage during a market downturn early in retirement locks in losses in a way that the same withdrawal rate during a rising market wouldn't — this sequence-of-returns risk means two retirees with identical pots and identical average returns over 20 years can end up in very different positions purely because of the order those returns arrived in.
Another mistake is assuming income needs stay flat throughout retirement. In practice, many retirees spend more in the earlier, more active years, less in a middle period, and more again later due to potential care costs — a smooth flat withdrawal figure is a reasonable starting approximation, but real plans often benefit from reviewing spending needs by decade rather than assuming one number for a 25-30 year retirement.
Can I combine drawdown and an annuity?
Yes — a common approach uses part of a pot to buy an annuity for guaranteed essential income, while leaving the remainder in drawdown for flexibility and growth potential, discussed further in our drawdown versus annuity guide.
How does the 25% tax-free lump sum affect this calculation?
Most people can take up to 25% of their pension pot tax-free (subject to statutory limits), typically at the point they first access it — if you plan to take this lump sum, reduce your "pension pot" figure by that amount before applying a withdrawal rate to the remainder for ongoing income.
What withdrawal rate do most UK retirees actually use?
This varies widely and has shifted over time as interest rates and market conditions change — some retirees use a fixed percentage close to 4%, others use a more flexible, review-based approach that adjusts withdrawals depending on how their investments have performed, particularly after the introduction of pension freedoms in 2015 made flexible drawdown far more common.
Is it better to take a lower income and preserve capital, or a higher income and accept more risk of running out?
This is a deeply personal trade-off involving your other assets, health and life expectancy considerations, and appetite for risk — there's no universally right answer, which is why many retirees choose to review their withdrawal rate periodically rather than fixing it permanently at the outset.