Retirement Income Planner 2026/27

Why a Single Number Never Captures Retirement Income

A State Pension forecast tells you one figure. A Pension Credit calculator tells you another. A drawdown tax tool tells you the tax on one withdrawal. None of them tell you what actually lands in your account across a full year once every source is stacked together, taxed once as a combined total, and checked against what you actually need to live on. That combined view — not any single figure — is what determines whether a retirement plan works.

The gap this creates in practice: someone with a full State Pension and a modest drawdown pot can look comfortable on paper from each calculator individually, while the combination pushes them into a higher tax band they didn't expect, or their pot empties years before their State Pension alone would have been enough. This planner exists to catch exactly that kind of interaction, which single-purpose tools structurally cannot see.

Annuity, Drawdown or Hybrid — Comparing the Three Structures

The planner above asks whether your private pension is fixed (annuity or defined benefit) or invested (drawdown), because the two behave completely differently over a 20-30 year retirement. Most retirees are better served by a hybrid than by an all-or-nothing choice, but the calculator lets you model either extreme first.

The last row matters more than it looks. Once unused drawdown funds are pulled into the Inheritance Tax estate from April 2027, holding a large undrawn pot purely "to pass on" stops being the tax-free strategy it used to be — which changes the calculus toward drawing down more steadily during your own lifetime rather than preserving the pot at all costs. An annuity was never part of an estate in the same way, so this legal shift doesn't touch it at all.

Is a High Withdrawal Rate Worth the Risk?

The "4% rule" — withdraw 4% of your pot in year one, then adjust for inflation each year — is a rough US-derived guideline, not a guarantee, and it was never designed around a State Pension floor sitting underneath it. In a UK context with a guaranteed, inflation-linked State Pension already covering part of your needs, the right withdrawal rate from your own pot depends on how much of your total target income the State Pension already supplies.

Work it through concretely: if your target is £24,000 and your State Pension supplies £12,548 of it, your pot only needs to cover the remaining £11,452. Against a £150,000 pot, that's a 7.6% withdrawal rate on the pot itself — well above the traditional 4% guideline — even though it looks moderate when described only as "topping up the State Pension." The planner's sustainability estimate is exactly this calculation, made explicit rather than left to intuition.

Reading Your Planner Result

The headline net income figure is only the entry point. Three secondary numbers in the breakdown decide whether the plan actually works:

A shortfall and a low pot-years figure appearing together is the single most important combination to notice: it means the current plan fails on both timing and amount, and adjusting only one won't fix it.

Three Retirement Income Scenarios

Scenario A — pot depletes years before the target horizon

Scenario B — guaranteed income covers the target with room to spare

Scenario C — a small pension still leaves room for Pension Credit

The Long-Term Arithmetic: Inflation, Fiscal Drag and Sequence Risk

A plan that balances on paper in year one doesn't necessarily balance in year fifteen, for three separate reasons that compound rather than offset each other.

Inflation erodes fixed nominal withdrawals but not the State Pension. The State Pension rises each year under the triple lock, while a fixed cash withdrawal from a drawdown pot buys progressively less unless you deliberately increase it. Over 20 years even moderate inflation roughly halves the real spending power of a withdrawal amount left unchanged — so a plan reviewed only once at retirement quietly drifts off target.

Fiscal drag pulls more of your income into tax over time, without a single rate rising. The Personal Allowance and higher-rate threshold have been frozen for years and are set to remain frozen into the later 2020s. As the State Pension itself rises with the triple lock while the tax-free threshold stands still, an increasing share of a fixed retirement income becomes taxable purely through the passage of time — a mechanical tax rise nobody voted for and few retirees notice happening.

Sequence-of-returns risk hits drawdown pots specifically, not annuities. A pot that suffers a market fall in its first few years of withdrawals depletes faster than the same average return spread evenly across the whole retirement, because you're selling more units at depressed prices to generate the same income. Two retirees with identical average investment returns over 25 years can have completely different outcomes purely based on the order those returns arrived in — a risk this planner's no-growth estimate deliberately understates, since it assumes a flat path rather than the real, uneven one.

Mistakes That Wreck a Retirement Income Plan

• Treating gross pot value as spendable income. A £150,000 pot is not £150,000 of income — 75% of what you draw beyond your tax-free cash is taxable, and ignoring this overstates real spending power by a wide margin.
• Planning around today's tax bands as if they're permanent. With the Personal Allowance frozen, the same nominal income will be taxed more heavily in real terms five years from now than it is today.
• Never re-testing sustainability after the first year. A pot that "looked fine" at retirement can be running dry years ahead of schedule after a poor early sequence of returns — checked once and forgotten is a common and costly habit.
• Assuming a private pension rules out Pension Credit. As Scenario C shows, a workplace pension of a few hundred pounds a year rarely closes the gap to the guarantee level on its own.
• Ignoring the household view for a mixed-age couple. If one partner is below State Pension age, Pension Credit generally isn't available to the household at all yet — see the Mixed-Age Couple Calculator before assuming this planner's Pension Credit flag applies to you.
• Forgetting deferral as a lever. Someone still working with a comfortable income from other sources may get more lifetime value by deferring the State Pension rather than drawing it now and paying tax on it immediately — a genuinely different answer from simply maximising this year's income.

Edge Cases the Planner Handles Differently

2025/26 vs 2026/27 — What Actually Changed for Retirement Income

Three separate 2026/27 changes interact with a combined retirement income plan in ways that a single-benefit calculator won't show together.

The State Pension age change is the one most plans overlook, because it doesn't show up as a cash figure at all — it changes the number of years a pot needs to bridge before the State Pension arrives. Someone assuming a 66th-birthday start date who actually faces 66 years and 7 months needs their pot (or other income) to cover an extra seven months that a plan drawn up under the old assumption simply won't have budgeted for.

Separately, the Inheritance Tax change taking effect from 6 April 2027 — bringing most unused pension funds into the taxable estate — is not yet in force for 2026/27, but any multi-year plan built today should treat it as a known, scheduled change rather than a surprise to react to later.

How Tax Stacking Changes Your Real Income

Each income source in the calculator above is assessed on its own by the body that pays it, but HMRC taxes you on the combined total for the year — which is why a plan built by looking at each source in isolation routinely under-forecasts the tax due. A State Pension of £12,548 sits almost exactly at the Personal Allowance on its own; add a £9,000 annuity and £4,978 of that annuity is now taxed at 20% purely because the State Pension used up the tax-free band first, not because the annuity itself is large.

This ordering effect — State Pension and other regular income effectively "filling" the Personal Allowance before a drawdown withdrawal is even considered — is the same mechanism explored in detail, with exact band-by-band figures, on the Drawdown Tax Calculator. This planner applies the same combined-income logic across every source at once rather than one withdrawal at a time, which is the difference that matters when you're deciding an annual budget rather than the tax on a single payment.

Who This Planner Is For

If more than two of the narrower tools above apply to your situation at once, that's usually the signal this combined planner will be more useful than working through each calculator separately and trying to add the results up by hand — which is exactly the step where the tax-stacking and threshold interactions described above tend to get missed.

Frequently Asked Questions