Pension Calculator

How the Pension Calculator works

This calculator projects how your pension pot might grow over time, based on your current pot size, ongoing contributions, assumed investment growth rate, and retirement age. All figures are shown in today's money (real terms) by adjusting for inflation, so you can judge whether the projected fund will actually cover your retirement costs.

Why starting early matters more than contributing more

Compound growth is the dominant force in pension projections. A 25-year-old contributing £200/month until 65 at 5% real growth will accumulate roughly twice as much as a 35-year-old contributing £400/month over the same period, despite contributing a similar total. The extra decade of growth does the heavy lifting. The Pension Calculator makes this comparison concrete: try halving your monthly contribution and starting 10 years earlier to see the difference.

Employer contributions and tax relief

Your employer's contribution is essentially free money. Don't leave it on the table by contributing less than the minimum needed to claim the full employer match. Tax relief adds a further boost: a basic-rate taxpayer contributing £80 effectively puts £100 into their pension (the government adds 20% relief). Higher-rate taxpayers can claim an additional 20% through Self Assessment, making each £100 contribution cost just £60 net.

The 2026/27 annual allowance

The pension annual allowance (the maximum you can contribute across all pension schemes in a tax year and receive tax relief) is £60,000 for 2026/27 (or 100% of your UK earnings if lower). High earners above £260,000 in adjusted income face a tapered allowance. Carry forward lets you use unused allowance from the previous three tax years to make larger one-off contributions.

How much should you contribute to your pension?

The most widely cited rule of thumb is to halve your age when you start contributing and use that as your total contribution percentage (employee + employer). So starting at 30 means targeting 15% of salary in total. This is a rough guide, your actual target depends on the lifestyle you want in retirement, when you want to retire, and what the State Pension will contribute.

The auto-enrolment minimum for 2026/27 is 8% of qualifying earnings (at least 3% from your employer). This minimum is almost certainly not enough for a comfortable retirement, most financial planners suggest 12–15% of total earnings as a more realistic target once you include employer contributions. Use the calculator to test different rates and see how the projected pot changes.

Defined contribution vs defined benefit

This calculator is designed for defined contribution (DC) pensions, the most common type in the private sector, where the final pot depends on contributions and investment growth. The retirement income you get depends on how your investments perform and how you draw from the pot (annuity, drawdown, or a combination).

Defined benefit (DB) pensions, common in the public sector, work differently: your pension is calculated as a fraction of your salary for each year of service, regardless of investment performance. If you have a DB pension, the employer's actuaries value it against the annual allowance using a 20:1 multiplier. The rules are complex; consult your scheme administrator or a pension specialist.

Taking your pension: options at retirement

From age 57 (rising from 55 in 2028) you can access a defined contribution pension. You can take up to 25% tax-free as a lump sum (capped at £268,275 for most people following the lifetime allowance changes). The remaining funds can be taken as:

• Annuity, You exchange your pot for a guaranteed income for life. Rates vary with interest rates and your health. Provides certainty but inflexibility.
• Flexi-access drawdown, Your pot remains invested and you draw income as needed. Offers flexibility and potential for continued growth, but you bear the investment risk and longevity risk of running out of money.
• Uncrystallised funds pension lump sum (UFPLS), Take chunks directly from your pension pot; 25% of each chunk is tax-free, 75% taxable as income.

Pension income is taxed as earned income in the year it is received. Sequencing withdrawals carefully across tax years, particularly relative to the personal allowance and basic-rate band, can significantly reduce the lifetime tax paid on your pension.

Salary sacrifice: the most tax-efficient contribution method

If your employer offers a salary sacrifice arrangement, it is almost always the most efficient way to contribute. Your employer reduces your contractual gross pay by your contribution amount before calculating income tax and National Insurance. You save:

• Income tax at your marginal rate (20%, 40% or 45%)
• Employee NI at 8% (or 2% above £50,270)
• Your employer also saves 15% employer NI, many pass this saving into your pot

Use the Salary Sacrifice Calculator to model exactly how much tax and NI you save at your income level, and whether your employer passes their NI saving through.