How much pension will you have?
Your retirement income comes from three places: workplace/personal pensions, the State Pension, and other savings. This guide explains how pensions grow, the tax perks, and how much to pay in.
Contributions, tax relief and compounding
A pension is a long-term investment with two big advantages: tax relief on what you pay in, and compound growth over decades. Every £80 a basic-rate taxpayer contributes is topped up to £100 by tax relief; higher-rate taxpayers can claim more back. That boosted amount then grows tax-free inside the pension. Because compounding rewards time, starting earlier matters far more than paying in large amounts later.
Auto-enrolment and employer contributions
Under auto-enrolment, employees contribute a minimum of 5% of qualifying earnings and employers add at least 3% — free money you shouldn't turn down. Many employers will match higher contributions, so paying in enough to get the full match is usually the best-value saving you can do. The calculator's "monthly contribution" should include both your and your employer's payments.
Grab the full match first
Tax-free cash and income
From age 55 (rising to 57 in 2028) you can normally take 25% of your pot tax-free. The rest provides income — via drawdown (keeping it invested and withdrawing flexibly), an annuity (a guaranteed income for life), or lump sums. A common rule of thumb is that withdrawing around 4% a year gives a reasonable chance the pot lasts through retirement, though this depends on returns and how long you live.
Allowances to know
You get tax relief on pension contributions up to the annual allowance (£60,000 for most people in 2025/26, or 100% of earnings if lower), with tapering for very high earners and a lower limit once you start drawing flexibly. There's no longer a lifetime allowance cap on the pot itself, but limits apply to tax-free lump sums. The State Pension is separate and needs around 35 qualifying NI years for the full amount.
Common mistakes
- Starting late. Compounding rewards time more than amount. Even small early contributions beat large late ones.
- Not getting the employer match. Contributing below the match threshold turns down free money.
- Forgetting the State Pension. It's a valuable, separate income — check your forecast and NI record.
- Ignoring charges. High fund or platform fees compound against you over decades. Keep costs low.