Pension Drawdown Calculator — Tax-Free Cash, Tax & Pot Longevity

Strip away the jargon and pension drawdown is just this: instead of buying a guaranteed income for life with your pension pot, you keep the money invested and withdraw from it as and when you need to. Since the 2015 pension freedoms scrapped the old requirement to buy an annuity, this has become the default route for most people accessing a defined contribution pot.

What the tool above does is take your pot, your planned withdrawals and any other income you already have, then work out the bit that actually matters: not just "what's my tax-free cash," but what you're left with once your drawdown income is stacked on top of your State Pension and taxed at your marginal rate — and roughly how many years the remaining pot can support that.

So rather than juggling HMRC's tax bands and a spreadsheet, you get a straight answer: your tax-free lump sum, your tax bill, your net income, and a realistic sense of whether you're drawing down too fast.

From age 55 (rising to 57 from April 2028), you can take up to 25% of your pension pot completely tax-free — this is formally called the Pension Commencement Lump Sum, or PCLS. It's the single biggest perk of accessing a defined contribution pension, and it doesn't count towards your Personal Allowance or push you into a higher tax band.

There is a ceiling, though: the tax-free cash you can take across all your pensions in your lifetime is capped by the Lump Sum Allowance of £268,275. On a £200,000 pot, 25% is £50,000 — no issue. On a £1.5 million pot, 25% would be £375,000, but you're capped at £268,275, so the tax-free proportion effectively shrinks the bigger the pot gets.

You don't have to take it all in one go. Many people take a smaller lump sum upfront and draw the rest gradually via UFPLS withdrawals (Uncrystallised Funds Pension Lump Sum), where each withdrawal is automatically 25% tax-free and 75% taxable — useful if you'd rather spread the tax-free entitlement across several tax years instead of banking it all at once.

Once the tax-free 25% is out of the way, every further withdrawal from your drawdown pot is treated as income — exactly like a salary — and taxed at your marginal rate in the tax year you take it. It's stacked on top of everything else you're earning that year: State Pension, any other private pension, part-time work, rental income.

For 2026/27 the bands are: 0% up to £12,570 (your Personal Allowance), 20% from £12,570 to £50,270, 40% from £50,270 to £125,140, and 45% above £125,140. If your total income passes £100,000, your Personal Allowance itself starts shrinking, disappearing entirely by £125,140 — the so-called "60% tax trap," since you lose £1 of tax-free allowance for every £2 you earn over £100,000.

Here's the bit that surprises a lot of people: the full new State Pension alone is close to the Personal Allowance, so it soaks up nearly all of it before your drawdown income even gets counted. That means a fairly modest withdrawal on top can be taxed from the very first pound. Spreading larger withdrawals across more than one tax year, where possible, is one of the simplest ways to keep more of it.

There's no legal limit on how much you can withdraw from a flexi-access drawdown pot each year — you could take it all in one go if you wanted to. That flexibility is exactly why it's easy to draw down too fast without noticing until it's too late.

A commonly used starting point is a 4% initial withdrawal rate, adjusted for inflation each year, which historically has given a reasonable chance of a pot lasting 25-30 years. Pull much more than that, especially in the early years of retirement, and a run of poor investment returns can deplete the pot far faster than the averages suggest — this is known as sequencing risk, and it's one of the main arguments some retirees make for holding back part of the pot in cash or blending in a small annuity to cover essential costs.

The pot longevity figure in the calculator above is a straight-line projection based on your withdrawal amount and growth assumption — it's a useful sense-check, not a guarantee, since real markets don't move in a straight line.

Flexi-access drawdown

Take your tax-free lump sum upfront, then draw taxable income from the rest whenever and however much you like, while it stays invested. Full flexibility, full investment risk, and the pot can run out if you draw too much too soon.

UFPLS (Uncrystallised Funds Pension Lump Sum)

Take ad-hoc lump sums straight from an untouched pot, each one automatically 25% tax-free and 75% taxable. Useful if you don't want to commit to a formal drawdown set-up, or you'd rather spread your tax-free entitlement across several tax years instead of taking it all at once.

Annuity

Hand over some or all of your pot in exchange for a guaranteed income for life — no investment risk, no risk of running out, but no flexibility and typically nothing left for beneficiaries once you've bought it. Annuity rates through 2026 have been among the strongest since 2008, which has made partial annuitisation — covering essential costs only — a popular middle-ground choice.

Say you've got a £250,000 pension pot at age 60, and you take the full 25% — £62,500 — tax-free upfront. You're also receiving the full new State Pension, around £11,973 a year, and you decide to draw £12,000 a year in taxable income from what's left.

Your other income of £11,973 already uses almost all of your £12,570 Personal Allowance, so nearly the whole £12,000 drawdown is taxed at 20% — a tax bill of roughly £2,394. That leaves you with about £21,579 net for the year, combining your State Pension and your after-tax drawdown.

With £187,500 left invested after the lump sum, growing at an assumed 4% and drawing £12,000 a year, the pot would be projected to last around 18 years — comfortably to age 78, though not necessarily beyond it. Worth running your own numbers through the calculator above, since a slightly lower withdrawal or a better growth assumption changes that answer quite a lot.

Where these figures come from: the government's own guidance at gov.uk/tax-on-pension covers how drawdown income is taxed, MoneyHelper has independent guidance on annuities, drawdown and lump sums, and the free, impartial Pension Wise service (for over-50s) offers a one-to-one appointment before you decide anything. You can browse every other tool on this site from the mortgage calculators homepage.