Pension Drawdown & Income Sustainability Calculator
Calculate sustainable pension drawdown income and how long your pension pot will last with realistic investment growth and inflation.
Pension Drawdown Guide
Safe Withdrawal Rates
The 4% rule: research by William Bengen (1994) found 4% initial withdrawal, increased annually with inflation, lasted 30+ years in 95%+ of historical scenarios. Assumed 50/50 stocks/bonds. Modern UK perspective: more conservative — start at 3.5%. Bonds yields lower now than in Bengen's data. Markets have higher valuations. Adjustments: higher withdrawal (5%+): higher risk of running out before death. Lower withdrawal (3%): safer but lower lifestyle. Variable withdrawal: adjust each year based on
Sequence-of-Returns Risk
When you retire matters as much as how much you save. Negative returns in early retirement years are devastating to portfolio longevity. Same long-term average return, different sequences: portfolio that gains then loses lasts decades longer than portfolio that loses then gains. Mitigation strategies: hold cash buffer 2-3 years before retirement. Reduce withdrawals in bear markets — skip inflation increases, or reduce by 10-20%. Don't sell during downturns — withdraw from cash/bonds instead. Ann
Tax on Pension Drawdown
25% tax-free lump sum: can take in one go OR spread across smaller chunks (UFPLS — Uncrystallised Funds Pension Lump Sum). 75% taxable as income: added to other income. Tax bands as normal. Personal Allowance: £12,570 — first slice tax-free. Combined State Pension and drawdown can push you into higher tax bands. Inheritance: pensions pass IHT-free until April 2027 (Autumn 2024 Budget proposes inclusion from then). Lifetime Allowance: abolished April 2024 — no longer a concern for most. But lump
Avoiding Running Out
Big risks to long retirement income: living longer than expected. Life expectancy: 65-year-old today has ~50% chance of reaching 87 (men) or 89 (women). Plan for 25-30 years of retirement. Inflation. Even 2% inflation halves purchasing power in 35 years. 5% inflation halves in 14 years. State Pension increases with triple lock but private pension income often doesn't. Care home costs. £40,000-80,000/year in later years. May exhaust portfolio rapidly. Some equity release options. Health needs. In
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