Drawdown vs annuity calculator
- See how long your pot lasts in drawdown
- Compare with a guaranteed annuity income
- Adjust income, growth and annuity rate
- Understand the flexibility vs certainty trade-off
- No sign-up required
Drawdown vs annuity calculator
Enter your pot and the yearly income you want. This shows how long the pot lasts in drawdown at your chosen investment growth, next to the guaranteed income an annuity would pay for life.
This is an estimate, not financial advice. Drawdown outcomes depend on real investment returns, which vary year to year, so a fixed growth rate is a simplification. Annuity rates change daily and depend on your age, health and options. Get a real quote and consider free guidance from Pension Wise before deciding. Source: MoneyHelper taking your pension.
Sources
- Taking your pension: drawdown and annuities MoneyHelper
- Guaranteed retirement income (annuities) explained MoneyHelper
- Pension Wise free guidance appointments MoneyHelper
Drawdown vs annuity: the real trade-off
When you retire with a defined contribution pension, this is the big decision: turn the pot into a guaranteed income with an annuity, or keep it invested and take money out flexibly through drawdown. Both are valid, and the right answer depends on how much you value certainty against flexibility.
An annuity is simple. You hand your pot to an insurer and they pay you a set income for the rest of your life, however long that is. It can't run out. The catch is you give up the pot, so there's usually nothing to pass on, and the income is fixed unless you pay extra for a rising one. Drawdown is the opposite. Your pot stays invested, you take out what you want, and anything left goes to your family. But the income isn't guaranteed, and if you take too much or markets fall, the pot can run dry while you're still relying on it.
How long does drawdown last?
Take a £200,000 pot with 4% annual growth after charges. If you draw £11,000 a year, the pot lasts about 31 years, so from age 67 you'd be pushing 98 before it ran out. Push the income to £15,000 a year and it lasts only about 19 years, running out in your mid-80s. Drop it to around £6,000 a year and the growth roughly keeps pace with what you take, so it lasts more or less indefinitely. The calculator above shows the number for your own figures.
The 4% guide
You'll often hear the "4% rule". The idea is that taking 4% of your pot in year one, then adjusting for inflation, gives the money a fair chance of lasting around 30 years. It's a rough guide, not a promise. Real returns are lumpy, and a run of bad years early in retirement does more damage than the same years later, because you're selling investments while they're down. Many retirees flex their withdrawals, taking a bit less after a bad year, to make the pot last.
Why annuities are worth another look
Annuities had a bad reputation through the 2010s when rates were poor. That changed when interest rates rose from 2022. A single-life level annuity at 67 now pays around 5.5%, so £200,000 buys about £11,000 a year guaranteed for life. Compare that to drawing the same £11,000 from drawdown, where you carry all the investment and longevity risk yourself. For income you can't outlive, the annuity does the job with no worry.
Most people don't have to choose just one
The split many advisers suggest is to annuitise enough to cover your essential bills, food, energy, council tax, so you always have a guaranteed floor, then keep the rest in drawdown for holidays, treats and flexibility. That way you get certainty where it matters and flexibility everywhere else. You can also start in drawdown and buy an annuity later in your 70s, when rates are higher because you're older.
Model your own numbers above, then see the detail on each option: the annuity calculator covers joint life and rising income, and the withdrawal tax calculator shows the tax on drawdown income. For the full pot projection, use the pension pot calculator.
Common questions
Neither is better for everyone. An annuity gives a guaranteed income for life that can't run out, but you give up the pot and the flexibility. Drawdown keeps your pot invested, stays flexible, and can be passed on, but the income isn't guaranteed and the pot can run out if you take too much or markets fall. Many people cover essential bills with an annuity and keep the rest in drawdown.
It depends on how much you take and how your investments perform. As a rough guide, a £200,000 pot with 4% annual growth lasts about 31 years if you take £11,000 a year, but only about 19 years if you take £15,000 a year. Taking around 3% to 4% of the pot a year is often considered sustainable, but there are no guarantees.
The 4% rule is a rough guide that says if you withdraw 4% of your pot in the first year and adjust for inflation after that, the money has a good chance of lasting around 30 years. It's a starting point, not a guarantee, and it depends heavily on investment returns and how long you live. Many people flex their withdrawals up or down depending on how markets do.
Yes, and many people do. A common approach is to buy an annuity with enough of your pot to cover essential bills, giving you a guaranteed floor of income, then keep the rest in drawdown for flexibility and to pass on. You can also start in drawdown and buy an annuity later, when rates are usually higher because you're older.