Your retirement pot and assumptions
How to read the result
Annuity exchanges the entire pot for a guaranteed lifetime income. The income amount is fixed at purchase (or rises by RPI / fixed % if you bought an escalating annuity at a lower starting rate). The pot is gone — there's no inheritable balance.
Drawdown keeps the pot invested and you withdraw a chosen percentage each year. Cumulative income depends on how long the pot lasts, which depends on returns and withdrawal rate. The remaining pot at death is inheritable (and tax-efficient if death is before age 75).
The longevity trade-off
Annuities are insurance against living a long time — the longer you live, the better the annuity value. Drawdown is insurance against dying with money to spare — the earlier you die, the more passes to heirs. The breakeven age above shows the crossover: live longer than that and the annuity wins on income; die before and drawdown wins on residual estate.
What the calculator doesn't model
- Sequence of returns risk — drawdown's biggest hidden danger. A market crash in early retirement can permanently impair the pot even if the long-run average return matches expectations.
- Inflation. The annuity rate above is assumed level (not RPI-linked). RPI-linked annuities start at roughly half the level rate but rise over time.
- Spousal benefits. Joint-life annuities continue to pay a percentage to a surviving spouse but at a reduced rate; the calculator assumes single-life.
- Enhanced annuity rates for people in poor health. Smokers, diabetics, and people with serious health conditions can often get 10-30% higher annuity rates via the underwriting process.
- The 25% tax-free lump sum. This calculator assumes the entire pot goes into either the annuity or drawdown. In practice most retirees take 25% tax-free first.
When annuity tends to win
- You live well beyond average life expectancy.
- You're risk-averse and the certainty of the income matters more than the residual estate.
- Annuity rates are unusually high (correlated with high gilt yields — currently better than the 2010s lows).
- You qualify for an enhanced annuity due to health.
When drawdown tends to win
- You die earlier than average — heirs receive a meaningful pot.
- Investment returns exceed the implicit return baked into annuity rates (typically gilt yield plus a small margin).
- You want flexibility to take more in some years and less in others.
- Your other income (State Pension, partner's income) covers your essential spending, so drawdown only funds discretionary expenses.
The hybrid approach
Many advisers recommend buying an annuity covering only your essential spending (after State Pension), and leaving the rest in drawdown for flexibility and inheritance. This caps longevity risk on the necessities while preserving upside on the discretionary pot. The calculator above doesn't model the hybrid, but you can run two scenarios to approximate it.
Related calculators
Pension drawdown tax calculator · Tax-free lump sum calculator · State Pension forecast · FIRE calculator