Pension calculator

Estimate your pension income and see how much you need to save to reach your desired standard of living in retirement.

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Savings and Returns

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The UK Pension System

The UK pension system consists of three main pillars:

  1. State Pension

The State Pension is paid by the government to those who have built up enough qualifying years of National Insurance contributions:

  • Full new State Pension (2024/25): £221.20 per week (approx. £11,502/year)
  • Qualifying years needed: 35 years of NI contributions for the full amount (minimum 10 years for any payment)
  • State Pension age: Currently 66, rising to 67 by 2028 and 68 thereafter
  • Triple lock: Rises each year by the highest of inflation, average earnings growth, or 2.5%

  1. Workplace Pension (Auto-Enrolment)

All UK employers must automatically enrol eligible employees into a workplace pension scheme:

  • Minimum contributions: 8% of qualifying earnings (5% employee + 3% employer)
  • Qualifying earnings band (2024/25): £6,240 to £50,270
  • Types: Defined contribution (most private sector) or defined benefit (some public sector)

  1. Private Pension Savings (Voluntary)

To supplement the first two pillars, you can save privately through:

  • Self-Invested Personal Pension (SIPP): Flexible, tax-efficient pension with 20%/40%/45% tax relief on contributions
  • Lifetime ISA (LISA): 25% government bonus on up to £4,000/year (age 18-50, for retirement or first home)
  • Stocks and Shares ISA: Tax-free growth up to £20,000/year
  • Property: Paid-off housing reduces expenses in retirement

How Much Do You Need in Retirement?

Guidelines for pension needs:

  • Basic: 60-70% of final salary before tax
  • Comfortable: 70-80% of final salary before tax
  • Maintain Standard of Living: 80-100% of final salary before tax

Note as a retiree:

  • Higher personal allowance: No extra allowance, but lower overall income typically means a lower effective tax rate
  • No National Insurance contributions once past State Pension age
  • Often have lower expenses (paid-off mortgage, no child expenses)

The 4% Rule

Our calculator uses the 4% rule to estimate required pension capital. This rule suggests you can withdraw 4% of your capital annually without depleting it over a 30-year retirement period.

Required Capital = Desired Annual Pension / 0.04

Example: If you want £30,000/year, you need £750,000 in capital.

Compound Interest and Long-Term Savings

Starting early has a huge effect due to compound interest. Example:

Start at 25 years old

  • Monthly Savings: £300
  • Savings Period: 42 years (until 67)
  • Return: 6% per year
  • Total Capital at 67: ~£640,000
  • Contributed: £150,000
  • Return: £490,000

Start at 40 years old

  • Monthly Savings: £300
  • Savings Period: 27 years (until 67)
  • Return: 6% per year
  • Total Capital at 67: ~£250,000
  • Contributed: £97,200
  • Return: £153,000

Conclusion: Starting 15 years earlier gives you 2.5× more capital, even though you only contribute 50% more in total.

Tips for Good Pension Saving

  • Start early: Compound interest is your best friend
  • Save regularly: Automatic monthly contributions
  • Long-term horizon: Tolerate market fluctuations
  • Diversify: Spread risk across asset classes
  • Keep costs low: Choose low-cost index funds
  • Increase savings: Raise contributions as your salary grows
  • Check your State Pension forecast: Visit gov.uk/check-state-pension to see your projected entitlement