UK pension calculator

How UK pensions work

The UK pension system has two main layers: the state pension (paid by the government from National Insurance contributions) and workplace or private pensions (money invested in your name, usually a defined contribution pot). Most people will rely on both.

The full new state pension is £221.20 per week for 2026/27, which works out to £11,502 per year. You need 35 qualifying years of National Insurance contributions to receive the full amount. If you have between 10 and 34 qualifying years, you'll receive a proportional amount. Fewer than 10 qualifying years means you get nothing from the state.

Auto-enrolment: the numbers

Since 2019, all eligible workers are automatically enrolled into a workplace pension. The minimum total contribution is 8% of qualifying earnings: 5% from you (including tax relief) and 3% from your employer. Qualifying earnings for 2026/27 are between £6,240 and £50,270.

On a £30,000 salary, qualifying earnings are £23,760 (£30,000 minus £6,240). At 8%, total contributions are £1,901 per year. Your employer puts in £713. You put in £950 net, which becomes £1,188 after basic-rate tax relief is added. Many people don't realise their employer contribution is essentially free money.

Average pension pots: the reality

According to the Pensions Policy Institute, the median pension pot for someone aged 55 to 64 is around £61,000. The mean is higher at £107,000, pulled up by those with large pots. But for most people approaching retirement, their pot is far smaller than they'd like.

A £61,000 pot would buy an annuity paying roughly £3,400 per year at current rates (for a 67-year-old, level, single life). Combined with the full state pension, that's about £14,900 per year total. The Pensions and Lifetime Savings Association (PLSA) says you need £14,400 for a "minimum" retirement, so a median pot barely scrapes past that threshold.

The 25% tax-free lump sum

When you access your pension (from age 55, rising to 57 in 2028), you can take 25% of your pot as a tax-free lump sum. On a £100,000 pot, that's £25,000 cash with no tax to pay. The remaining 75% is taxed as income when you draw it down.

You don't have to take the lump sum all at once. Under flexi-access drawdown, you can take 25% of each withdrawal tax-free. This gives you more control over your tax position year by year.

Worked example: estimating your retirement pot

Let's say you're 40 years old with a current pot of £45,000. You contribute £300 per month (including employer contributions and tax relief). You assume 5% annual growth after charges. You plan to retire at 67.

Over 27 years, your monthly contributions of £300 grow to approximately £199,000 (future value of regular payments at 5%). Your existing £45,000 pot grows to approximately £168,000 at 5% compound growth. Total estimated pot at 67: roughly £367,000.

From that £367,000 pot:

• 25% tax-free lump sum: £91,750
• Remaining pot for income: £275,250
• Annual drawdown at 4%: £11,010 per year
• Plus full state pension: £11,502 per year
• Total annual income: £22,512

That puts you between the PLSA "minimum" (£14,400) and "moderate" (£31,300) retirement living standards. If you want the moderate standard, you'd need to increase contributions or extend your working years.

Drawdown vs annuity

With drawdown, your pot stays invested and you take an income from it. The money can run out if you live long enough or if markets fall. With an annuity, you exchange your pot for a guaranteed income for life. You can't run out of money, but you lose flexibility and your family inherits nothing if you die early.

At age 67, annuity rates are approximately 5.5% for a level, single-life annuity (as of mid-2026). That means a £200,000 pot would buy you £11,000 per year, guaranteed for life. A joint-life annuity (paying 50% to a surviving spouse) drops to around 4.8%, giving £9,600 per year.

Most people now choose drawdown over annuities. Around 72% of pension pots are accessed through drawdown according to FCA data from 2025. But annuities have become more attractive since interest rates rose from 2022 onwards.

State pension: check your forecast

You can check your state pension forecast for free on gov.uk. It shows how many qualifying years you have, how much you're on track to receive, and whether you can make voluntary NI contributions to fill gaps. Filling gaps costs £824.20 per year for Class 3 contributions (2026/27 rate) and can add £275 per year to your state pension. That's a payback period of just 3 years.

If you've been contracted out of the additional state pension at any point (common for public sector workers before 2016), your forecast will be lower. But you still build qualifying years toward the new state pension.

What to do next

Our interactive calculator is coming soon. In the meantime, you can estimate your position manually using the figures above, or use the gov.uk state pension forecast to check your NI record. For a full breakdown of how much you actually need, read our guide: How much pension do I need to retire in the UK?