Pension Drawdown Calculator 2025/26

Q: What is pension drawdown and how does it work?

Pension drawdown (flexi-access drawdown) lets you keep your pension pot invested while withdrawing income flexibly. You can take up to 25% as a tax-free lump sum (PCLS), capped at £268,275. Withdrawals from the remaining pot are taxed as earned income at your marginal rate. Your pot stays invested and can be passed to beneficiaries on death.

Q: How much tax-free cash can I take from my pension?

You can take up to 25% of your pension pot as a tax-free Pension Commencement Lump Sum (PCLS), capped at £268,275 across all pensions (the lump sum allowance). This replaced the Lifetime Allowance from April 2024. You do not have to take the full 25%. Source: HMRC.

Q: What is the difference between flexi-access drawdown and UFPLS?

Flexi-access drawdown: take up to 25% tax-free upfront (PCLS), then all subsequent withdrawals are fully taxable. UFPLS: each withdrawal is 25% tax-free and 75% taxable, with no upfront lump sum. Both trigger the Money Purchase Annual Allowance (MPAA) of £10,000, restricting future pension contributions.

Q: What is the Money Purchase Annual Allowance (MPAA)?

The MPAA is a reduced annual allowance of £10,000 per year that applies once you flexibly access your pension through drawdown or UFPLS. Before triggering it, the standard annual allowance is £60,000 (2025/26). Taking only tax-free cash (PCLS) does not trigger the MPAA. Source: HMRC.

Q: Will my pension be subject to Inheritance Tax from 2027?

Yes. From 6 April 2027, unused pension funds and death benefits will be included in your estate for Inheritance Tax (IHT). Exceptions apply for pensions passed to a surviving spouse/civil partner or charity. Personal representatives will be responsible for reporting and paying any IHT due. Source: Autumn Budget 2024, gov.uk.

Plan your pension income in retirement. Calculate how long your pot lasts, see tax on withdrawals, and compare flexi-access drawdown vs UFPLS vs annuity options.

Plan how long your pension pot will last in drawdown

Pension pot

Total value of your defined contribution pension(s)

Tax-free lump sum (PCLS)

Max 25% of pot, capped at £268,275

Annual income needed

How much you want to withdraw each year

Your age

Min pension access age: 55 (57 from Apr 2028)

State Pension age

Currently 66, rising to 67 by Apr 2028

Investment growth

Expected annual growth of remaining pot

Inflation rate

Bank of England target: 2%

Other annual income

E.g. part-time work, rental income (excl. State Pension)

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Try another scenario

How to Use This Calculator

Drawdown Plan tab

Enter your pension pot, the percentage you want to take as a tax-free lump sum (PCLS), your annual income target, and your current age. The calculator projects how long your pot will last, factoring in investment growth, inflation, tax on withdrawals, and the State Pension boost from your State Pension age. Expand "More options" to adjust growth rates, inflation, and other income sources.

Tax on Withdrawals tab

Enter a withdrawal amount and your other income for the tax year. Choose between flexi-access drawdown (fully taxable) and UFPLS (25% tax-free per withdrawal). The calculator shows the exact tax due, the emergency tax risk on your first withdrawal, and the optimal withdrawal amount to stay within the basic rate band.

Flexi-Access vs UFPLS vs Annuity tab

Compare three pension income options side by side using the same pot. See the net income, tax impact, how long your pot lasts, and what happens to the remaining fund on death for each option. Adjust the annuity rate to reflect current market quotes for your age.

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The Formula

Pension drawdown projections use compound growth on the remaining pot after each annual withdrawal:

Tax-Free Lump Sum (PCLS) = min(Pot × 25%, £268,275)

Remaining Pot = Pension Pot − PCLS

Each year:
Pot(y) = (Pot(y-1) − Annual Withdrawal) × (1 + Growth Rate)

Tax on Withdrawal:
Total Taxable Income = Pension Withdrawal + Other Income
Tax = Personal Allowance (£12,570) at 0%
    + next £37,700 at 20% (basic rate)
    + £50,271 to £125,140 at 40% (higher rate)
    + above £125,140 at 45% (additional rate)

UFPLS Tax-Free Element = Withdrawal × 25%
UFPLS Taxable Element = Withdrawal × 75%

Emergency Tax (Month 1) = Tax calculated on 1/12th of annual bands

The key variables are your withdrawal rate and investment growth. A sustainable withdrawal rate is typically 3.5-4% of your pot per year. Withdrawing more than growth erodes your pot; withdrawing less allows it to continue growing.

Tax efficiency matters significantly. Keeping total income below £50,270 avoids the 40% higher rate. The personal allowance taper between £100,000 and £125,140 creates an effective 60% marginal rate — a critical trap to avoid when planning large withdrawals.

Example

Sarah — Retired Teacher, 62, Manchester

Sarah has a defined contribution pension pot of £350,000. She retired at 60 and wants to take some tax-free cash and draw an income until her State Pension kicks in at 67.

Drawdown Plan tab

Pension pot£350,000

PCLS taken25% (£87,500 tax-free)

Pot after PCLS£262,500

Annual income needed£18,000

Growth rate4%

Pot lasts until age82

Tax on £18,000 withdrawal£1,086/year (basic rate)

State Pension from 67£11,973/year

Combined income from 67£29,973/year

By taking 25% tax-free upfront and drawing £18,000/year, Sarah stays within the basic rate band. When her State Pension starts at 67, her combined income rises to nearly £30,000/year. She could reduce drawdown at that point to extend her pot further.

Tax on Withdrawals tab

Sarah considers a one-off £40,000 withdrawal for home improvements. With £18,000 regular drawdown already taken:

Withdrawal£40,000

Other income£18,000

Total taxable£58,000

Tax on withdrawal£8,486 (crosses into 40% band)

The £40,000 withdrawal pushes Sarah into the higher rate band. She could split it across two tax years to save over £3,000 in tax.

FAQ

What is pension drawdown and how does it work? ▼

Pension drawdown (also called flexi-access drawdown) lets you keep your pension pot invested while withdrawing income as needed. You can take up to 25% as a tax-free lump sum (PCLS), then draw the rest flexibly. Withdrawals from the remaining pot are taxed as earned income at your marginal rate. Your pot stays invested and can grow or shrink depending on market performance. You can vary your withdrawals each year — taking more when needed and less when you have other income. Unlike an annuity, the remaining pot can be passed to beneficiaries on death.

How much tax-free cash can I take from my pension? ▼

You can take up to 25% of your pension pot as a tax-free lump sum, known as the Pension Commencement Lump Sum (PCLS). Since April 2024, this is capped at £268,275 across all your pensions (the lump sum allowance). This replaced the old Lifetime Allowance. If you have pension protections from before April 2024, your cap may be higher. The remaining 75% stays in your pension for drawdown or annuity purchase. You do not have to take the full 25% — you can take less or none at all. Source: HMRC.

What is the difference between flexi-access drawdown and UFPLS? ▼

Flexi-access drawdown: you designate funds into a drawdown account, optionally taking up to 25% tax-free upfront (PCLS). All subsequent withdrawals are fully taxable as income. UFPLS (Uncrystallised Funds Pension Lump Sum): you withdraw directly from your uncrystallised pot. Each withdrawal is 25% tax-free and 75% taxable. UFPLS is simpler but both methods trigger the Money Purchase Annual Allowance (MPAA) of £10,000, restricting future pension contributions. The tax outcome can differ depending on your total income and withdrawal amounts.

What is the Money Purchase Annual Allowance (MPAA)? ▼

The MPAA is a reduced annual allowance of £10,000 that applies once you flexibly access your pension — either through drawdown withdrawals or UFPLS payments. Before triggering the MPAA, your annual allowance is £60,000 (2025/26). After triggering it, you can only contribute £10,000 per year to money purchase pensions without incurring a tax charge. Taking only tax-free cash (PCLS) does not trigger the MPAA. The MPAA is particularly relevant if you plan to return to work or continue contributing to a pension after accessing drawdown. Source: HMRC.

Will my pension be subject to Inheritance Tax from 2027? ▼

Yes. The Autumn Budget 2024 announced that from 6 April 2027, unused pension funds and pension death benefits will be included in the value of your estate for Inheritance Tax purposes. Currently, pensions sit outside your estate. After April 2027, personal representatives (not pension schemes) will be responsible for reporting and paying any IHT due. Exceptions include pensions passed to a surviving spouse or civil partner, or to charity. This is a major change that may affect how you plan pension withdrawals and estate planning. Source: gov.uk, Finance Bill 2024-25.

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