Retirement Calculator

How this is worked out

The pot is built month by month rather than year by year, because contributions are monthly for almost everyone and annual compounding of a monthly contribution overstates the result by roughly half a year of growth.

Each contribution lands at the start of the month and earns that month's return — an annuity-due, which is how a payroll deduction actually behaves. The monthly rate is the twelfth root of the annual one:

monthly rate = (1 + annual return − charges)^1/12 − 1

Then the step most pension projections skip. A pot in 2058 is not spendable in units anyone understands, so it is divided back to today:

today's money = pot ÷ (1 + inflation)^years

Over 32 years at 2.5% that divisor is about 2.2. It is the reason this page leads with £347,644 and treats £766,124 as the second line. Statutory illustrations from your provider do the same thing and are legally required to, which is why a projection from your pension company usually looks lower than one from a website.

One thing the arithmetic above does not do is add relief. The contribution figure you enter is the amount arriving in the pension, relief included — so a basic-rate taxpayer paying £200 from their own pocket enters £250, and a higher-rate taxpayer claiming the rest through self-assessment enters the same £250 while having paid £150 net. The relief changes what the contribution costs you, not what lands in the pot.

The income the pot supports is solved rather than assumed: the calculator finds by bisection the first-year withdrawal that lasts the number of years you entered while rising with inflation, and reports what percentage of the pot that works out to.

A worked example

What a £100 pension contribution actually costs you

Relief is given at your marginal rate, so the same £100 in the pension has three different prices. A basic-rate taxpayer pays £80 and the government adds £20. A higher-rate taxpayer pays £80 up front and reclaims a further £20 through self-assessment or a tax code adjustment, so the net cost is £60. An additional-rate taxpayer nets out at £55.

This is the single largest thing separating pension arithmetic from savings arithmetic, and it is invisible in a compound-interest calculation. A higher-rate taxpayer redirecting £60 a month from spending into a pension puts £100 a month into the pot — a 67% uplift before a penny has been invested in anything.

The relief is not free money in the sense the match is in America; it is deferred tax. You are taxed on the way out instead, at whatever rate applies then, with 25% of the pot normally available tax-free. The bet is therefore the same one as a US traditional 401(k): your marginal rate now against your effective rate later. What makes it lopsided in the UK is the band structure — relief at 40% going in, against a retirement income that may be drawn largely at 20%.

Salary sacrifice, and what National Insurance does to the sum

Under salary sacrifice you give up gross salary and your employer pays the equivalent into your pension. The income tax outcome is the same as ordinary relief. What changes is National Insurance: the sacrificed salary was never paid, so neither you nor your employer pays NI on it.

For an employee the saving is the employee NI rate on the sacrificed amount. For the employer it is the secondary rate, which is substantially larger, and many employers pass some or all of that saving into the pension too — which is the part people miss when comparing schemes. Sacrificing £200 a month can put noticeably more than £200 a month into the pot.

The mechanism has consequences worth knowing about rather than being surprised by. Your gross salary on paper falls, which can affect mortgage affordability assessments, statutory maternity pay, and death-in-service cover expressed as a multiple of salary. Salary cannot be sacrificed below the National Minimum Wage. And because the money never counts as your pay, it is your employer’s scheme rules rather than your own decision that governs how it is invested.

The allowance, and where it disappears

The annual allowance for 2026/27 is £60,000, and it covers your contributions and your employer's together — not just your own. Unused allowance can be carried forward from the previous three tax years provided you were a member of a registered scheme in each of them.

Above £260,000 of adjusted income the allowance tapers by £1 for every £2 of income over that threshold, down to a floor of £10,000. There is a second gate: the taper does not bite at all unless threshold income also exceeds £200,000, which is broadly income excluding pension contributions. The two definitions are different on purpose and are the reason the taper is so widely miscalculated — a bonus that pushes adjusted income over the line can cost more allowance than the bonus is worth.

The other cliff is the money purchase annual allowance. Once you have flexibly accessed a defined-contribution pot — taking anything beyond the tax-free lump sum — the allowance for further defined-contribution saving drops to £10,000 for the rest of your life, carry-forward no longer applies to it, and the change is irreversible. Taking £1 of taxable income from a pot at 55 to test the system is enough to trigger it.

Pension or ISA is a question about access, not returns

The ISA allowance for 2026/27 is £20,000. There is no relief going in and no tax coming out. A pension gives relief going in and taxes the income coming out, with 25% normally tax-free. For a higher-rate taxpayer who will draw at basic rate, the pension is arithmetically ahead; the ISA's advantage is that the money is available at any age, which the pension's is not until 55, rising to 57 in 2028.

One dated change is worth building into a plan rather than discovering. In 2026/27 the whole £20,000 may still be held in cash. From 06/04/2027 a cash sub-limit of £12,000 applies, with savers aged 65 and over keeping the full allowance in cash. The remainder of the allowance stays available for stocks and shares.

The Lifetime ISA is a third option with its own arithmetic: £4,000 a year, a 25% government bonus up to £1,000, and a withdrawal charge if the money is used for anything other than a first home or retirement after 60. That charge is levied on the whole withdrawal rather than on the bonus, so it removes slightly more than the bonus added — a detail that has caught out a great many people who treated it as a flexible savings account.

Assumptions and sources

Pension allowances

GOV.UK "Pension schemes rates" — annual allowance £60,000, money purchase annual allowance £10,000, taper floor £10,000. checked 2026-08-24

Tapered annual allowance

HMRC "Work out your tapered annual allowance" — £1 lost per £2 of adjusted income above £260,000, subject to threshold income above £200,000. checked 2026-08-24

ISA limits

£20,000 overall; cash sub-limit of £12,000 from 2027-04-06, with savers aged 65+ exempt. Lifetime ISA £4,000 with a 25% bonus. checked 2026-08-24

The arithmetic

Monthly annuity-due accumulation, inflation-adjusted, with the sustainable withdrawal solved by bisection. Verified in tools/test/work.mjs against the closed-form annuity-due. Relief is not added to your figure — enter the amount arriving in the pension.