Question 1

How long will my pension last in drawdown?

Accepted Answer

It depends on the size of your pot, the income you draw, and the net growth rate after fees. A common rule of thumb is the 4% rule — withdraw 4% of your pot in year one, increase with inflation thereafter, and historically many US 30-year scenarios survived. This calculator models constant nominal income rather than inflation-adjusted withdrawals, so its sustainability picture can be more optimistic than the classical 4% rule while real purchasing power falls over time.

Question 2

What is the 4% rule for pension drawdown?

Accepted Answer

The 4% rule is a guideline from US research (Bengen 1994 and the Trinity Study, 1998) that says you can safely withdraw 4% of your pension pot in the first year of retirement, then increase that amount with inflation each year, and have a high probability of not running out of money over a 30-year retirement. It assumes a balanced portfolio of stocks and bonds. More recent UK-focused research suggests 3.0–3.7% is more cautious in current conditions, particularly because the original research was based on US asset returns. It's a starting point, not a guarantee — actual sustainability depends on market conditions, fees, sequence of returns, and individual circumstances.

Question 3

How much tax-free cash can I take from my pension?

Accepted Answer

Most UK pensions allow you to take up to 25% of your pot as a tax-free lump sum from age 55 (rising to 57 from 6 April 2028). The total tax-free cash you can take across all pensions is capped at the lump sum allowance — £268,275 for 2026/27. The remaining 75% is taxable as income when you draw it. Some older pensions have protected tax-free cash entitlements above 25% — check your scheme rules before transferring, as you can lose this entitlement.

Question 4

What is sequence-of-returns risk in pension drawdown?

Accepted Answer

Sequence-of-returns risk is the danger that poor investment returns early in retirement will permanently reduce how long your pot lasts, even if average returns over your full retirement are reasonable. Drawing income while the market is down can force sales at lower prices, depleting the pot faster. Some retirement plans use a cash buffer to reduce this risk, but the right approach depends on the wider plan.

How long will your pension last?