UK Pension Calculator 2025/26

How the Pension Calculator Works

This pension calculator projects the future value of your pension pot by modelling month-by-month compound growth over the years between your current age and your chosen retirement age. Each month, your existing pot grows by the net investment return (the annual growth rate minus the annual management charge, divided by 12), and your employee and employer contributions are added.

The projection uses compound growth, meaning each month's returns are calculated on the total pot including all previous growth and contributions. This is how real pension investments work: your returns generate their own returns, creating a snowball effect that becomes increasingly powerful the longer you invest.

Once the projected pot at retirement is calculated, the calculator estimates your sustainable retirement income using the 4% withdrawal rule. This guideline, based on the Trinity Study of historical US market returns, suggests that withdrawing 4% of your pot in the first year and adjusting for inflation in subsequent years gives you a high probability of not running out of money over a 25 to 30 year retirement.

If you choose to include the state pension, the full new state pension amount of £11,973 per year (for 2025/26) is added to your private pension income to give a combined total. The state pension is only included if your retirement age is at or above the state pension age of 67.

UK Pension Rules for 2025/26

The UK pension landscape has seen significant changes in recent years. Here are the key rules and allowances for the 2025/26 tax year:

The abolition of the lifetime allowance from April 2024 was one of the most significant pension changes in recent years. Previously, there was a limit on the total value of pension benefits you could accumulate without incurring a tax charge (£1,073,100 at its final level). This has now been removed entirely, meaning there is no cap on the size of your pension pot.

However, the maximum tax-free lump sum you can take at retirement remains capped at £268,275 (which was 25% of the old lifetime allowance). This means that while you can build up a pension of any size, the tax-free cash element is limited. Amounts above the 25% tax-free portion are taxed as income when withdrawn.

State Pension 2025/26

The new state pension, which applies to people who reached state pension age on or after 6 April 2016, pays a flat rate of £11,973 per year (£998.08 per month) for 2025/26. This amount is determined by the triple lock, which guarantees the state pension increases each year by whichever is highest: average earnings growth, inflation (CPI), or 2.5%.

To receive the full new state pension, you need 35 qualifying years of National Insurance contributions or credits. If you have between 10 and 35 qualifying years, you receive a proportional amount. For example, with 20 qualifying years, you would receive 20/35ths of the full amount, which is approximately £6,842 per year.

National Insurance credits are automatically given for periods when you are claiming certain benefits, such as Child Benefit for a child under 12, Universal Credit, or Jobseeker's Allowance. You can also make voluntary NI contributions to fill gaps in your record. Check your state pension forecast on the GOV.UK website to see how many qualifying years you have and what your projected state pension will be.

The state pension age is currently 66 for both men and women. It is scheduled to increase to 67 between 2026 and 2028, affecting people born on or after 6 April 1960. A further increase to 68 is planned, though the exact timing is subject to review by the government.

Pension Tax Relief Explained

Pension contributions benefit from tax relief, which is one of the main incentives for saving into a pension. Tax relief effectively means the government tops up your pension contributions by refunding the income tax you would have paid on that money.

The way tax relief works depends on whether you are in a net pay arrangement or a relief at source scheme:

For relief at source pensions, the pension provider automatically claims basic rate relief (20%) from HMRC and adds it to your pot. If you are a higher or additional rate taxpayer, you must claim the extra relief through your self-assessment tax return. For net pay pensions, the full tax relief is applied automatically through your payroll because contributions are deducted before tax is calculated.

Salary sacrifice pension arrangements provide an additional benefit: because your contractual salary is reduced, you also save on National Insurance contributions (8% for employees). This makes salary sacrifice the most tax-efficient method of pension contribution for most employees.

For higher earners subject to the personal allowance taper (income between £100,000 and £125,140), pension contributions are particularly valuable. Making pension contributions reduces your adjusted net income, which can restore your personal allowance and effectively provide 60% tax relief on those contributions.

Workplace Pension Auto-Enrolment

Since the auto-enrolment programme was fully rolled out in 2018, all UK employers must automatically enrol eligible employees into a workplace pension scheme. Eligible employees are those aged between 22 and state pension age, earning more than £10,000 per year, and working in the UK.

The minimum contribution rates for auto-enrolment are:

Qualifying earnings for 2025/26 are those between £6,240 and £50,270 per year. Contributions are calculated on this band, not on your total salary. For example, if you earn £30,000, the qualifying earnings are £30,000 minus £6,240, which equals £23,760. Your minimum 5% employee contribution would be £1,188 per year (£99 per month), and your employer would add at least £712.80 per year (£59.40 per month).

Many employers offer more generous pension contributions than the minimum. Some match employee contributions pound for pound up to a certain percentage, while others contribute a fixed percentage regardless of the employee's contribution. It is always worth checking your employer's pension scheme details, as contributing enough to maximise your employer's match is one of the best financial decisions you can make — it is effectively free money that directly increases your retirement savings.

Worked Examples

Example 1: Young Professional Starting at 25

A 25-year-old earning £30,000 per year with no existing pension savings, contributing 5% of salary (£125/month) with a 3% employer match (£75/month), 5% growth, and 0.75% charges:

• Years to retirement (age 67): 42 years
• Total employee contributions: £63,000
• Total employer contributions: £37,800
• Projected pot at 67: approximately £334,000
• Annual retirement income (4% rule): approximately £13,360
• Plus state pension: £11,973
• Total annual income: approximately £25,333

Starting early is the single most powerful advantage in pension saving. The 42-year compounding period means investment growth contributes more to the final pot than the actual contributions made. Even modest monthly contributions grow substantially over four decades.

Example 2: Mid-Career Professional at 40

A 40-year-old earning £50,000 with £80,000 in existing pension savings, contributing £400 per month with a £200 employer contribution, 5% growth, and 0.5% charges:

• Years to retirement (age 67): 27 years
• Total employee contributions: £129,600
• Total employer contributions: £64,800
• Projected pot at 67: approximately £589,000
• Annual retirement income (4% rule): approximately £23,560
• Plus state pension: £11,973
• Total annual income: approximately £35,533

Having an existing pot of £80,000 at age 40 provides a solid foundation. The combination of the existing savings growing for 27 years and the ongoing monthly contributions creates a much larger pot than either component alone.

Example 3: Late Starter at 50

A 50-year-old with £30,000 in existing savings, making maximum affordable contributions of £800 per month (employee) with £300 employer, 5% growth, and 0.75% charges:

• Years to retirement (age 67): 17 years
• Total employee contributions: £163,200
• Total employer contributions: £61,200
• Projected pot at 67: approximately £361,000
• Annual retirement income (4% rule): approximately £14,440
• Plus state pension: £11,973
• Total annual income: approximately £26,413

Starting later means less time for compound growth, so higher monthly contributions are needed to build an adequate pot. This example shows that even with significantly higher monthly contributions (£1,100 total versus £200 in Example 1), the shorter time horizon results in a comparable final pot. The earlier you start, the less you need to contribute to reach the same goal.

Common Pension Mistakes

1. Not Starting Early Enough

The power of compound growth means that starting your pension contributions even five years earlier can make a dramatic difference to your final pot. A 25-year-old contributing £200 per month at 5% growth will have approximately £320,000 at age 67. A 30-year-old making the same contributions will have approximately £240,000 — £80,000 less, despite only starting five years later. The extra five years of compounding is worth more than the additional £12,000 in contributions.

2. Opting Out of Your Workplace Pension

Opting out of your employer's workplace pension means losing your employer's contributions, which is effectively turning down free money. If your employer contributes 3% of qualifying earnings, opting out on a £30,000 salary costs you approximately £713 per year in lost employer contributions, plus the tax relief on your own contributions. Over a 40-year career, this could amount to over £100,000 in lost pension savings including investment growth.

3. Ignoring Management Charges

Annual management charges may seem small as a percentage, but they compound over time just like investment returns. A fund charging 1.5% per year will consume a significantly larger portion of your pot over 30 or 40 years compared to a fund charging 0.25%. On a pot that would otherwise grow to £500,000, the difference between 0.25% and 1.5% in annual charges could be over £150,000. Always check the charges on your pension fund and consider switching to lower-cost options where available.

4. Not Increasing Contributions with Pay Rises

When you receive a pay rise, increasing your pension contribution by at least half the raise is a painless way to boost your retirement savings. For example, if your salary increases from £35,000 to £37,000, increasing your pension contribution by 1% of salary (£370 per year, or £31 per month) costs you very little from your take home pay (after tax relief, it may cost just £19 per month), but over 25 years this small increase could add over £15,000 to your pension pot.

5. Taking Your Pension Too Early

While you can access your pension from age 55, doing so early reduces the time your pot has to grow and increases the number of years it needs to last. Taking your pension at 55 instead of 67 means your pot has 12 fewer years of growth and needs to last 12 extra years. Unless you have other income sources or a very large pot, accessing your pension before the state pension age can significantly increase the risk of running out of money in later retirement.

6. Not Checking Your State Pension Forecast

Many people assume they will receive the full state pension of £11,973 per year, but your actual entitlement depends on your National Insurance record. Gaps in your record from periods of self-employment, living abroad, or not working can reduce your state pension. You can check your forecast and NI record for free on the GOV.UK website, and you may be able to make voluntary contributions to fill gaps. At approximately £824 per missing year, voluntary NI contributions often provide an excellent return on investment.