Project pension drawdown with sustainability check.
Years pot lasts
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Initial withdrawal rate
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Tax-free lump sum
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Drawdown in plain terms
Flexi-access drawdown leaves your pension pot invested while you take income from it as and when you choose. You can take up to 25% of the pot as a tax-free lump sum, and the rest stays invested and is taxed as income when you withdraw it. The risk that the pot runs dry stays with you, which is the trade-off for the flexibility and for keeping whatever is left to pass on. This tool projects how long a pot lasts given your annual withdrawal and an assumed return, and it flags whether your withdrawal rate looks sustainable. It is for anyone approaching retirement deciding how hard they can lean on their pot.
The balance the default quietly demonstrates
The preset figures are a textbook case worth understanding rather than glossing over. A £400,000 pot, a 4% annual return, and a £16,000 yearly withdrawal sit in perfect equilibrium. Four percent of £400,000 is exactly £16,000, so the growth each year matches the income you draw and the pot stays at £400,000 indefinitely. The tool returns 60 or more years and calls it a reasonable sustainable rate. That is the famous 4% guideline in its purest form.
| Year | Growth at 4% | Withdrawal | Pot at year end |
|---|---|---|---|
| Start | £400,000 | ||
| 1 | £16,000 | £16,000 | £400,000 |
| 2 | £16,000 | £16,000 | £400,000 |
| Onwards | £16,000 | £16,000 | £400,000 |
The chart is deliberately flat, because that is the whole lesson: when withdrawals equal real growth, the pot holds its level and the income can run for life. Nudge the withdrawal up to £20,000, a 5% rate, and the same tool will show the pot eroding and a finite number of years instead.
Why the real world is harsher than the equilibrium
A flat 4% return every year is a fiction. Real markets deliver good and bad years in an unpredictable order, and the order matters enormously in drawdown. A run of poor returns in the first few years, while you are still drawing the full income, shrinks the pot before it has a chance to recover. This is sequence-of-returns risk, and it is why two retirees with the same average return can end up in very different places. The tool warns when your initial withdrawal rate climbs above 4.5%, because that is where the margin for a bad early sequence thins out. The constant 4% assumption is also not inflation-adjusted, so a fixed £16,000 buys less each year as prices rise. Treating the result as nominal, not real, spending power is the honest reading.
Tax and a planning judgement
The 25% tax-free lump sum is capped at the £268,275 lump sum allowance, which only bites on pots above roughly £1.07 million, so most drawdown plans take the full quarter tax-free. Everything you then draw from the taxable 75% counts as income, stacking on top of the State Pension and any other earnings, and is taxed at your marginal rate after the £12,570 personal allowance. A common and expensive mistake is taking a large taxable chunk in a single year and tipping yourself into the 40% band when spreading it across two tax years would have kept it all at 20%. There is also the money purchase annual allowance: once you flexibly access taxable pension income, the amount you can still pay into pensions each year drops sharply, from £60,000 to £10,000, which catches people who keep working. A practical tip is to draw only the tax-free cash first while leaving the taxable pot untouched if you are still earning, preserving both your tax band and your future contribution room.
Questions retirees raise
At what age can I start drawdown?
The normal minimum pension age is currently 55, rising to 57 from 6 April 2028. You do not have to stop working to access a pension in drawdown, and you can phase it, moving money into drawdown in stages rather than all at once, which can help manage both tax and the contribution allowance if you are still paying in.
What happens to the pot when I die?
Anything left in a drawdown pot can pass to your beneficiaries. If you die before 75 it can usually be inherited free of Income Tax, and after 75 the beneficiary pays Income Tax at their own rate on what they withdraw. This residual value is one of the main reasons people choose drawdown over an annuity, which typically pays nothing on after death unless you have bought specific guarantees.