Approaching retirement? Plan it in order
The five to ten years before you stop work are when the big retirement decisions land. This guide runs the five calculations that turn a pension pot into a reliable income — from final contributions to drawdown and the order you draw your savings.
You want £25,000 a year in retirement. What pot does that need?
£11,973
full state pension
4%
a common drawdown rate
25%
tax-free lump sum
Retirement income comes from three places — your pension pot, the State Pension, and any other savings — and the trick is making them last. The full new State Pension is around £11,973 a year, which fills part of the gap; the rest depends on your pot and how you draw it. Each calculator below settles one piece — run them in order and “will I have enough?” becomes a number you can plan around.
The pre-retirement path, step by step
Five calculations in the order the final stretch demands — build the pot, decide how to draw it, then sequence your income to last and stay tax-efficient.
Are your contributions on track?
The last working years are the most powerful for topping up — contributions still get tax relief, and you may be able to carry forward unused allowance from previous years. Check whether a final push closes any gap between your projected pot and the income you want.
Pension Contribution Calculator →How much can you draw each year?
Once retired, the question is how much you can take without running out. The 4% rule is a common starting point, though many prefer 3–3.5% for a long retirement. Sequence-of-returns risk — poor early returns — is the danger. Model a sustainable income from your pot.
Pension Drawdown Calculator →Annuity, drawdown, or both?
An annuity buys guaranteed income for life; drawdown keeps your pot invested and flexible but exposed to markets. Many retirees use an annuity to cover essential bills and drawdown for the rest. Compare what each delivers from your pot before you commit.
Annuity vs Drawdown Calculator →Which savings should you draw first?
The order you draw matters for tax. Using ISAs (tax-free) alongside pension income can keep you in a lower band, and your 25% tax-free lump sum needs planning. Drawing in the wrong order can needlessly push income into higher-rate tax. Work out the efficient sequence.
ISA vs SIPP vs GIA Calculator →How much cash should you hold?
A cash buffer of one to two years’ income lets you avoid selling investments in a downturn — the single biggest protection against sequence-of-returns risk in early retirement. Size it before you stop work, so a bad market year doesn’t force a bad decision.
Emergency Fund Calculator →Why the order matters
Contributions come first because the years before retirement are your last chance to close a shortfall while tax relief still applies — once you’ve stopped work, the pot is largely fixed. Knowing whether you’re on track shapes everything that follows.
Drawdown and the annuity decision come before the withdrawal-order and cash-buffer steps because how you’ll take income determines how to arrange the rest. There’s no point optimising the tax order of withdrawals until you’ve decided whether you’re drawing flexibly, buying guaranteed income, or blending both. Decide the income method, then sequence and protect it.
Roughly what pot supports what income
A simplified illustration at a 4% withdrawal rate, before State Pension. The full new State Pension (around £11,973) adds to these once it starts.
| Income from your pot | Pot needed (4% rule) |
|---|---|
| £10,000/year | ~£250,000 |
| £15,000/year | ~£375,000 |
| £20,000/year | ~£500,000 |
| £25,000/year | ~£625,000 |
These figures are illustrative and exclude the State Pension, which reduces the private pot you need once it begins (currently from age 66, rising to 67). A more cautious 3.5% withdrawal rate raises the pot needed by roughly 14%. Up to 25% of a pension can usually be taken tax-free. Model your own target with the pension drawdown calculator.
Ready to run your own numbers?
Begin with your contributions — the last chance to close any gap — then work down the path one calculator at a time.
A pre-retirement plan, worked through
One realistic example, run through the whole sequence, to show how the steps connect in practice.
- Final contributions. With a few working years left, Linda makes larger pension contributions — still getting tax relief — and checks carry-forward of unused allowance to close her gap.
- Drawdown. Her £320,000 pot supports roughly £12,800/year at 4%; with the State Pension to come, that gets her close to £22,000.
- Annuity vs drawdown. She considers an annuity for essential bills and drawdown for the rest, blending certainty with flexibility.
- Withdrawal order. She plans to use her 25% tax-free lump sum and ISA savings to top up income while keeping taxable withdrawals in a lower band.
- Cash buffer. She sets aside 2 years of income in cash, so an early market dip won’t force selling investments at a loss.
The takeaway: the State Pension (~£11,973) fills much of Linda’s gap — but only from State Pension age, so the order she draws her pot and ISAs before then is what keeps her tax-efficient and her pot intact.
Five mistakes people make approaching retirement
The errors that recur among those nearing UK retirement — and the ones that cost the most.
Leaving final contributions too late
The last working years are the most powerful for topping up — tax relief still applies and carry-forward may be available. Missing this window means a permanently smaller pot.
Cost: a smaller pot for good Fix: maximise final contributionsUsing the 4% rule for a long retirement
The 4% rule assumes ~30 years. For a long or early retirement, many planners prefer 3–3.5%. Over-withdrawing early, when sequence risk bites hardest, can drain the pot.
Cost: running short later Fix: use a cautious withdrawal rateDrawing savings in a tax-inefficient order
Taking taxable pension income when ISAs or the tax-free lump sum could top up instead can push you into a higher band needlessly. The order of withdrawals matters for tax.
Cost: avoidable higher-rate tax Fix: plan the withdrawal orderForgetting the State Pension in the maths
The full State Pension (~£11,973/year) reduces the private pot you need — but only from State Pension age. Plan how to fund any gap between retiring and that age.
Cost: over- or under-saving Fix: factor in the State PensionRetiring with no cash buffer
A market downturn in the first years can force selling investments at a loss — sequence-of-returns risk. A one-to-two-year cash cushion is the simplest defence.
Cost: locking in early losses Fix: hold 1–2 years in cashRetirement planning questions, answered
How much pension do I need to retire in the UK?
What is the 4% rule for retirement?
Should I take an annuity or use drawdown?
How much of my pension is tax-free?
In what order should I draw my retirement savings?
When can I claim the State Pension?
How big a cash buffer should I have in retirement?
Other Calclens guides & tools
How this guide is built
The sequence follows the final stretch to retirement — topping up the pot while you still can, then deciding how to turn it into income that lasts and stays tax-efficient — the order a retirement adviser would work through with someone nearing the end of their career.
Every calculator linked here is a free Calclens tool with its own methodology. Withdrawal-rate guidance, the State Pension figure, the tax-free lump sum and pension access rules follow current GOV.UK and FCA guidance; figures are illustrative and returns are not guaranteed.
Definitions and sources: methodology · sources.
Not financial advice. This guide is for general information and links to calculators that produce estimates. Retirement decisions are significant and hard to reverse — consider regulated financial advice, and the free government Pension Wise service, before acting.