Updated
A workplace pension in the United Kingdom is built from three contributions, and missing the second is the most expensive mistake available. Automatic enrolment requires a minimum total contribution as a percentage of qualifying earnings, made up of the employee's share, the employer's share and tax relief; opting out forfeits the employer's part entirely, which is money that has no equivalent anywhere else. Contributions receive relief at your marginal rate, within an annual allowance and a tapered allowance for high earners, and twenty-five per cent of the pot can normally be taken tax free from the minimum pension age, the rest being taxed as income. This simulator projects the pot from contributions and an assumed return, and shows what the scheme's charges take. It does not model the annual allowance carried forward, which is individual.
Simulator Private Pension United Kingdom
Project your private retirement savings: Workplace Pension (auto-enrolment), SIPP (Self-Invested Personal Pension) and ISA (Individual Savings Account). Compare tax reliefs and optimise your strategy.
Your situation & savings
Summary
Total capital at retirement
£832,862
net after tax
Potential monthly income
£3,771
per month as annuity
You save
£546
per month (excl. employer match)
In practice: By saving £546/month for 33 years (plus employer contributions), you will accumulate a capital of £905,003. After tax, you are left with £832,862 net. Your investments have earned you £601,646 more than what you contributed.
The tax relief on your pensions amounts to £67,274 in cumulative tax benefits. As an annuity, this gives £3,771/month for life, in addition to your State Pension.
Total capital
£905,003
Workplace + SIPP + ISA
Monthly annuity
£3,771
If converted to annuity
Total tax relief
£67,274
Cumulative tax benefits
Net after tax
£832,862
Net available capital
Workplace Pension
Final capital
£278,790
Total contributions
£92,664
Interest earned
£186,126
Tax savings
£11,563
Exit tax
-£31,364
Net after tax
£247,426
SIPP
Final capital
£362,459
Total contributions
£109,000
Interest earned
£253,459
Tax savings
£19,800
Exit tax
-£40,777
Net after tax
£321,682
ISA
Final capital
£263,754
Total contributions
£84,200
Interest earned
£179,554
Tax savings
£35,911
Exit tax
-£0
Net after tax
£263,754
Capital growth
- Workplace
- SIPP
- ISA
- Total
Cumulative annuity vs remaining capital
- Cumulative annuity
- Remaining capital
Frequently Asked Questions
How much does my employer contribute to my workplace pension?
What is a SIPP and how does it differ from a workplace pension?
How much tax relief do I get on pension contributions?
Can I access my pension before age 55?
Should I use an ISA or a pension for retirement savings?
Simulateurs associés
Understanding UK retirement savings
Workplace Pension and auto-enrolment
Since 2012, all British employers must automatically enrol their eligible employees in a Workplace Pension. It is the cornerstone of retirement savings in the United Kingdom.
- Minimum contribution: 8% of qualifying earnings (£6,240-£50,270). Split: 5% employee + 3% employer.
- Tax relief: Your contributions are deducted before tax (net pay arrangement) or with an automatic 20% rebate (relief at source).
- NEST (National Employment Savings Trust): The government's default scheme for employers without their own plan. Low fees (0.3%/year).
- Many employers offer more than the legal minimum. Check your contract: some match up to 10% of your contributions.
Tip: Never opt out of auto-enrolment. Every £1 you contribute generates at least £0.60 in employer contributions + £0.25 in tax relief. That is an immediate 85% return before any investment.
SIPP: Self-Invested Personal Pension
The SIPP is a personal pension offering full control over your investments. It is the British equivalent of a dedicated retirement investment account, with major tax advantages.
- Automatic tax relief: The government adds 20% to every contribution. For £80 contributed, £100 is invested. Higher (40%) and additional (45%) rate taxpayers reclaim the difference via Self Assessment.
- Investment choice: Individual shares (UK and international), ETF/index trackers, active funds, bonds, REITs, AIM shares (with IHT advantages).
- Annual Allowance: £60,000/year in total contributions (across all pensions). Reduced to £10,000 for income above £260,000 (tapered).
- Access to the pot: From age 55 (57 from 2028). 25% tax-free lump sum, the rest taxed at your marginal rate.
- Typical fees: Online platforms (Vanguard, Hargreaves Lansdown, AJ Bell, Interactive Investor): 0.15%-0.45%/year + fund fees.
ISA: Individual Savings Account
The ISA (Individual Savings Account) is a tax wrapper unique to the United Kingdom: no tax on gains, dividends and withdrawals. Although not retirement-specific, it is an essential planning tool.
Stocks & Shares ISA
Invest in shares, ETFs, funds. Growth and dividends 100% tax-free. Ideal for the long term.
Cash ISA
Tax-free interest. Useful for emergency savings, but low returns.
Lifetime ISA (LISA)
Ages 18-39. 25% bonus (max £1,000/year) for a first home or retirement (age 60+).
Innovative Finance ISA
Peer-to-peer lending. Potentially higher returns, higher risk.
- Annual allowance: £20,000 (split freely between all ISA types)
- No tax on capital gains, dividends or interest
- Full liquidity: Withdraw whenever you want, with no penalty or tax
Tax relief on pensions
Tax relief is the main tax advantage of British pensions:
How it works:
Basic rate (20%)
£80 contributed = £100 invested
Automatic
Higher rate (40%)
£60 contributed = £100 invested
Via Self Assessment
Additional (45%)
£55 contributed = £100 invested
Via Self Assessment
- On withdrawal: 25% of the pot can be taken tax-free (Pension Commencement Lump Sum). The rest is taxed as income at your marginal rate.
- Optimal strategy: Contribute when you are a higher-rate taxpayer, withdraw when you are basic-rate (in retirement). Net saving of 20% on every pound.
- Carry forward: Unused allowances from the previous 3 years can be carried forward.
- Salary sacrifice: Some employers allow you to convert salary into pension contributions, also saving National Insurance contributions (12%+).
Lifetime Allowance and its evolution
The Lifetime Allowance (LTA) was the total limit on pension capital benefiting from tax advantages. It was abolished in April 2024.
- History: The LTA was £1,073,100. Beyond that, a tax of 55% (lump sum) or 25% (annuity) applied.
- Since April 2024: The LTA has been removed. No more penalty on large pots.
- Lump Sum Allowance: Partially replaces the LTA. The tax-free withdrawal is capped at £268,275 (25% of the former LTA).
- Annual Allowance: Remains at £60,000/year. This is now the main limit on pension contributions.
In practice: The removal of the LTA is excellent news for savers. You can now accumulate without limit in your pension, while staying within the annual cap of £60,000/year in contributions.
Decumulation strategies
Since the Pension Freedoms of 2015, you have the choice:
Drawdown (flexible withdrawal)
- Keep your pot invested
- Withdraw what you need
- Capital continues to grow
- Risk: depleting the pot if markets fall
- Transferable to heirs (outside IHT if death before age 75)
Annuity (lifetime income)
- Guaranteed income for life
- Fixed amount (or inflation-linked)
- No more market risk
- Less flexible: capital permanently surrendered
- Rates depend on age and interest rates
- UFPLS (Uncrystallised Funds Pension Lump Sum): One-off withdrawals, 25% tax-free each time.
- Mixed strategy: Use an annuity to cover essential expenses (rent, food) and drawdown for the rest. Security + flexibility.
- Natural yield: In drawdown, withdraw only the dividends and interest generated, preserving the capital for inheritance.
- 4% rule: Withdraw ~4% of your pot per year so it lasts 30+ years (rule of thumb, to be adjusted based on markets).