Pension Drawdown Simulator

The simulation

Each run builds thousands of possible futures, year by year, for two assets: equities and government bonds.

History scenarios stitch each future together from real years of the 1871–2020 record. Years are taken in runs whose length averages your chosen setting, starting at random points in history (a stationary block bootstrap). Crashes, recoveries and inflationary decades therefore arrive in their real order, with shares and bonds moving together as they actually did.

Assumption scenarios draw each year's return at random from a distribution centred on the long-run compound return you set, with your chosen volatility and correlation. With fat tails on, shocks follow a Student-t distribution (5 degrees of freedom) that hits both assets at once, so crashes arrive more often than a bell curve predicts.

The portfolio is rebalanced to your mix every year and charges come off annually. Contributions go in at the start of each saving year. In drawdown, each year's withdrawal comes out at the start of the year and the rest stays invested.

Everything is in today's money. Returns are after inflation, so £30,000 at 85 buys what £30,000 buys now.

Your plan, the mix comparison and the sustainable-income search all use the same futures, so differences come from your choices rather than luck. Sustainable income (Fixed income strategy) is the highest income, in today's money, that succeeds in at least your chosen share of futures. For the flexible strategies the key figure is instead the lowest yearly income you'd face in a poor market.

Drawdown strategies

• Fixed income withdraws whatever tops your guaranteed income up to your target after tax. A future fails if the pot runs dry before the end age.
• Guardrails start at your target. From the second year, each future's chance of still succeeding is estimated from how the pot compares with the cost of the rest of the plan and how volatile the portfolio is. If that chance falls below your lower guardrail, spending is cut by the step; above the upper guardrail, it rises by the step. Income stays between your minimum and maximum. This is the risk-based form of guardrails, which copes with state pension starting part-way through drawdown. The chance used by the rule is a quick approximation; the success rates reported are counted from the simulated futures.
• Percentage of pot withdraws a fixed share of the pot's value each year. A future fails if total income ever drops below your minimum.

UK rules used (2026/27)

• Income tax at England, Wales and Northern Ireland rates: personal allowance £12,570, 20% to £50,270, 40% to £125,140, 45% above. The allowance tapers away between £100,000 and £125,140. Scottish rates aren't modelled.
• Thresholds are frozen until April 2031, then assumed to rise with inflation. While frozen they shrink in real terms at your inflation rate.
• Tax-free cash is 25%, capped by the £268,275 Lump Sum Allowance, which isn't index-linked. "Phased" takes 25% of each withdrawal tax-free (UFPLS or phased drawdown). "Lump sum" takes it at the start of drawdown and treats it as spent outside the plan.
• The full new state pension is £241.30 a week (£12,547.60 a year) from April 2026. It is taxable, so it uses up most of the personal allowance.
• Withdrawals are grossed up so your total income after tax matches your target.

Why global, not US

Many retirement calculators, and the well-known "4% rule", are built on US market history since 1926. The US was one of the best-performing markets of the last century, so plans built on its record look safer than most investors' experience has been. The default scenario here is a global portfolio of 16 developed markets instead. The US scenario is there only so you can see the gap.

Annual returns after inflation. Return is the compound (geometric) average; volatility is the standard deviation of yearly returns. Forward-looking figures sit in the range of large asset managers' published 10-year assumptions for a sterling investor; check current editions.

The historical data

History scenarios use the Jordà–Schularick–Taylor Macrohistory Database (release 6): total returns on equities and government bonds, and consumer prices, for Australia, Belgium, Denmark, Finland, France, Germany, Italy, Japan, the Netherlands, Norway, Portugal, Spain, Sweden, Switzerland, the UK and the US.

• Returns are real, in each country's own currency. That is close to what a sterling investor gets with currency hedging, and avoids wartime exchange rates that lagged reality.
• The global series weights each country by the size of its economy the year before (real GDP). The US is about half of the weight today, against around two-thirds of a market-value index such as the FTSE All-World.
• Years with no data for a country (German bonds 1944–48, Japanese shares 1946–47) are left out of the global average for that year.

Data: Òscar Jordà, Moritz Schularick and Alan M. Taylor, "Macrofinancial History and the New Business Cycle Facts", NBER Macroeconomics Annual 2016; returns from Jordà, Knoll, Kuvshinov, Schularick and Taylor, "The Rate of Return on Everything, 1870–2015", Quarterly Journal of Economics 134(3), 2019. Licensed under CC BY-NC-SA 4.0; the real, GDP-weighted series in this page are derived from it and shared under the same licence.

What this leaves out

• History flatters: the data covers countries whose markets survived. Russia and China, where investors lost everything in 1917 and 1949, aren't in it, so the global figures are somewhat optimistic. The data also stops in 2020, before the 2022 bond crash. Use the return adjustments, the single-country scenario or the low-return scenario to stress this.
• Returns are index returns before costs; your charges are taken off separately. Currency movements aren't modelled.
• Assumption scenarios draw each year independently, so they miss long regimes such as the 1970s. History scenarios with longer runs keep them.
• One person and one pension pot. No ISA or other savings, partner, annuity purchase, care costs or property.
• No mortality: the plan runs to a fixed age. Pick an end age you have a real chance of reaching.
• Unused pensions come into inheritance tax from April 2027. This tool doesn't model what you leave behind.
• Tax and state pension rules can change.