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What is a Pension Calculator?

A pension calculator is a tool that helps people in the UK estimate how much money they may get from their pension plan when they retire. It uses things like their age, retirement age, salary, and how much money they've put into their pension plan to give an idea of their retirement income. Pension calculators are available from pension providers, financial advisors, and government websites. The estimate given by a pension calculator is not a guarantee and the actual amount someone gets may be different. This can be affected by things like changes in investment returns, inflation, and personal circumstances.

What is a Pension Annuity?

A pension annuity is a product that provides a regular income to someone after they retire. They give a lump sum of money to a pension company and, in return, receive a guaranteed income for the rest of their life. The amount of income they receive depends on factors like their age, gender, health, and the size of the lump sum. There are different types of annuities, including fixed, variable, and inflation-linked. Annuities can be a good option for people who want a secure income during retirement, but it's important to understand that once purchased, they can't change their mind or access the lump sum they gave to the pension company.

How do you take your pension?

Once you reach 55 years old (57 from 2028), you can take up to 25% of your pension savings as a one-time lump sum without paying taxes. You can keep the rest of your savings invested and withdraw from it as needed through a "drawdown" plan, or you can choose to buy a pension annuity. An annuity provides a guaranteed income for your whole life, based on your annuity rate, whereas drawdown doesn't provide a guaranteed income.

Sunny Avenue has partnered with the Money Advice Service to provide you this tool. The Money Advice Service is an independent service, set up by government to help people make the most of their money, giving free, unbiased money advice to everyone across the UK.

Pensions Calculator