Pension Calculator
Estimate your defined-benefit pension, compare lump sum vs annuity options, or calculate your total retirement income from all sources. Works with any currency.
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How to Use This Calculator
Tab "Pension Estimate"
Enter your final salary (or current salary if still working), years of service in the pension scheme, and select an accrual rate. Common rates are 1/60th (1.667%) and 1/80th (1.25%). The calculator shows your estimated annual and monthly pension, plus the pension as a percentage of your salary.
Tab "Lump Sum vs Annuity"
Enter your annual pension, a discount rate (typically 3-5%), and how many years you expect to receive payments. The calculator computes the present value of the annuity (the lump sum equivalent), the commutation factor, and a break-even timeline to help you decide between taking the lump sum or ongoing payments.
Tab "Pension + Other Income"
Enter your pension income, government pension (Social Security, State Pension, etc.), personal savings, and a withdrawal rate. The calculator shows your total retirement income and compares it to your final salary to produce an income replacement ratio. A ratio of 70-80% is generally considered adequate.
The Formulas
Annual Pension = Final Salary × Years of Service × Accrual Rate
Monthly pension:
Monthly Pension = Annual Pension / 12
Lump sum equivalent (present value of annuity):
Lump Sum = Annual Pension × [(1 − (1 + r)−n) / r]
where r = discount rate, n = payout years
Commutation factor:
Commutation Factor = Lump Sum / Annual Pension (typically 15–20×)
Total retirement income:
Total = Pension Income + Government Pension + (Personal Savings × Withdrawal Rate)
Income replacement ratio:
Replacement Ratio = Total Retirement Income / Final Salary × 100
All calculations are universal and pre-tax. No country-specific tax rates, retirement ages, or pension scheme rules are applied. Results are estimates.
Worked Examples
Example 1 — 30 years at 1/60th on $80,000 salary
An employee retiring with a final salary of $80,000 after 30 years in a 1/60th defined-benefit scheme.
After 30 years at 1/60th, the pension replaces exactly half the final salary. Each additional year of service adds another 1.667% of salary to the pension.
Example 2 — Lump sum vs annuity: $40,000/year pension
Comparing a $40,000 annual pension paid over 25 years against a one-time lump sum, using a 4% discount rate.
The lump sum of ~$625K reflects the time value of money. Over 25 years, the annuity pays $1M total, but those future dollars are worth less than today's dollars. If you invest the lump sum well, you could potentially beat the annuity.
Example 3 — Total retirement income from all sources
A retiree combines a $40,000 employer pension, $20,000 government pension, and $200,000 in personal savings with a 4% withdrawal rate.
At 85% replacement, this retiree exceeds the 70-80% benchmark. The pension does the heavy lifting, while savings provide a top-up. Higher savings or a more aggressive withdrawal rate would increase the ratio further.