The pension numbers that matter, explained like a normal person
Pension rules come with a lot of numbers, and most pages listing them read like the small print on a parking ticket. This one doesn't. Each number comes with what it is, what it means once you've retired, and the catch, because there's usually a catch.
All figures are for the 2026/27 tax year (6 April to 5 April), checked against GOV.UK. We update them every April, so you don't have to.
The numbers at a glance
| Number | 2026/27 |
|---|---|
| Full new State Pension | £241.30 a week |
| Personal Allowance | £12,570 a year |
| Basic rate band | 20% up to £50,270 |
| Tax-free cash limit | £268,275 in total |
| Minimum pension age | 55, rising to 57 |
| Annual allowance | £60,000 a year |
| Money purchase annual allowance | £10,000 a year |
| ISA allowance | £20,000 a year |
| Personal Savings Allowance | £1,000 (basic rate) |
| Dividend allowance | £500 a year |
| Capital gains allowance | £3,000 a year |
Full new State Pension
£241.30 a week, about £12,548 a year.
What it is: the government's pension for people who reached State Pension age from April 2016 onwards. It arrives every four weeks, rises every April, and never runs out. In retirement terms, it's the friend who always turns up.
What it means in retirement: for most people it's the foundation everything else sits on. Your own pensions and savings mostly fill the gap between it and what you spend.
Worth knowing: you need about 35 qualifying years of National Insurance for the full amount, and at least 10 for any at all. Plenty of people get a bit less or a bit more. A free forecast takes five minutes at GOV.UK, less time than finding the TV remote.
State Pension age
66 today, rising to 67 and then 68, depending on when you were born.
What it is: the earliest you can claim your State Pension. It doesn't arrive by itself; you have to claim it, though a letter usually nudges you first.
What it means in retirement: if you stop work before it, the years in between are paid for by your own pensions and savings. We call those the bridge years, and they do a surprising amount of the heavy lifting.
Worth knowing: the timetable is reviewed regularly, so the later dates could move. Check yours on GOV.UK.
Personal Allowance
£12,570 a year.
What it is: how much income you can have before income tax starts. Think of it as HMRC saying "the first slice is on us".
What it means in retirement: a full State Pension uses up nearly all of it, about £12,548 of your £12,570. So money you take from a pension on top is often taxed from nearly the first pound.
Worth knowing: it's frozen until 5 April 2031. As the State Pension rises each year and the allowance doesn't, more of your income ends up taxed. HMRC calls this a freeze. Your wallet calls it something else. It also shrinks by £1 for every £2 of income over £100,000, which few retirees reach, but those who do tend to notice.
Income tax bands
20% up to £50,270, 40% up to £125,140, 45% above. These are for England, Wales and Northern Ireland, and include the Personal Allowance.
What it is: once income passes the Personal Allowance, tax starts at the basic rate, then steps up in bands.
What it means in retirement: pension withdrawals count as income, taxed the same way as a salary (but with no National Insurance, a rare bit of good news). Taking a big lump in one tax year can push part of it into a higher band; spreading it over several years can mean less tax overall. Our drawdown and tax guide has worked examples.
Worth knowing: Scotland has its own bands, and more of them:
| Scottish band | Rate | Income up to |
|---|---|---|
| Starter | 19% | £16,537 |
| Basic | 20% | £29,526 |
| Intermediate | 21% | £43,662 |
| Higher | 42% | £75,000 |
| Advanced | 45% | £125,140 |
| Top | 48% | Above that |
Six bands where the rest of the UK makes do with three. Nobody said Scottish tax was minimalist.
Tax-free cash (the lump sum allowance)
Usually 25% of each pension, up to £268,275 in total.
What it is: the part of your pension you can take without paying income tax. Officially it's the "lump sum allowance", a name only a committee could love.
What it means in retirement: you can usually take it all at once, or a slice each time you withdraw. Either way it's capped at £268,275 across all your pensions, which is a quarter of a pot of about £1,073,100. Our tax-free cash guide explains the choices.
Worth knowing: once it's out of the pension, it's ordinary savings. Leave it in a bank account and inflation nibbles at it quietly.
Minimum pension age
55, rising to 57 from 6 April 2028.
What it is: the earliest most people can take money from a workplace or personal pension.
What it means in retirement: it's a different clock from the State Pension. The gap between the two is where early retirees need a plan, or at least a well-stocked biscuit tin.
Worth knowing: some schemes have a protected lower age. Your scheme can tell you.
Annual allowance
£60,000 a year.
What it is: the most that can go into your pensions each year (from you, your employer and tax relief together) before a tax charge.
What it means in retirement: mostly something to know about while you're still saving. Few people hit it by accident.
Worth knowing: it tapers down to £10,000 for very high earners (income over £260,000 including pension contributions). If that's you, you probably already have an accountant who sighs a lot.
Money purchase annual allowance
£10,000 a year.
What it is: a lower limit that kicks in once you've started taking taxable money from a pension pot. Taking only your tax-free cash doesn't trigger it.
What it means in retirement: if you dip into a pension and then keep working and saving, contributions above £10,000 a year can face a tax charge. It's there to stop people taking money out and putting it straight back in for more tax relief.
Worth knowing: it's one of the less-known traps, and it can't be switched off again once triggered. Your pension provider tells you when it applies.
ISA allowance
£20,000 a year.
What it is: how much you can put into ISAs each tax year. Interest, dividends and growth inside an ISA are tax-free, and so is taking money out.
What it means in retirement: ISA money doesn't count as income, so it doesn't use up your Personal Allowance or push you into a higher band. That makes it a handy pot to mix with pension withdrawals.
Worth knowing: it's frozen until 5 April 2031. Use it or lose it: any unused allowance doesn't roll over.
Personal Savings Allowance
£1,000 of interest tax-free for basic-rate taxpayers, £500 for higher rate, none for additional rate.
What it is: interest you can earn on savings before tax applies.
What it means in retirement: with a healthy cash pot and decent interest rates, it's easier to go over than it sounds. There's also a "starting rate for savings" of up to £5,000 of tax-free interest, but only if your other income is low.
Worth knowing: interest in an ISA doesn't count towards it.
Dividend allowance
£500 a year.
What it is: dividends from shares or funds you can receive before tax, outside an ISA or pension.
What it means in retirement: if you hold investments outside ISAs and pensions, dividends above this are taxed. It used to be much bigger, and has shrunk like a woolly jumper on a hot wash.
Capital gains allowance
£3,000 a year.
What it is: profit you can make selling investments (outside ISAs and pensions) before capital gains tax applies.
What it means in retirement: if you sell investments to fund spending, gains above this are taxed at 18% or 24%. Selling over several tax years can use the allowance more than once.
What these numbers can't tell you
Each number is simple on its own. The hard bit is how they work together over 30-odd years of retirement, with prices rising and markets doing whatever markets do. That's the sum the calculator does for you, using these exact figures. It's general information, not advice, and it never asks for your email address.
For free, impartial guidance, there's MoneyHelper and, if you're 50 or over with a pension pot, a free Pension Wise appointment.