SIPP calculator — methodology

Three steps, and which engine owns each

1. gross contribution = net contribution ÷ (1 − the basic rate)      tax-core
2. relief             = tax(income) − tax(income with it) + at source  tax-core
3. the pot            = the gross contribution compounded              projection-core
4. tax-free cash      = the pot × the statutory rate                   tax-core over 3
5. tax on the rest    = tax(other income + the rest) − tax(other income) tax-core over 3

Steps 1, 2 and 4 are arithmetic over figures published by government. Step 3 contains no published figure at all. Steps 4 and 5 are the awkward ones, and they are the reason this page states the distinction rather than leaving it to a footer: they are exact arithmetic over a number nobody can know, which looks more solid than either half and is not.

The division that is not an addition

£500.00 leaving a bank account becomes £625.00 in the SIPP. The gross figure is the net one divided by one less the basic rate, not multiplied by one plus it — the relief is the tax that would have been paid on the gross figure, so it is measured against the gross rather than added to the net. The wrong form understates a basic-rate contribution by a few per cent of the gross and gets worse as the rate rises, and it is the single most common error in this area.

The projection then receives the gross figure, because that is what lands in the pension. Feeding it the direct debit instead would understate every balance in the schedule by a fifth of every contribution ever made, compounded for the rest of the term — a mistake that looks entirely plausible on screen and grows for thirty years.

Relief above the basic rate is not added to the pot. It reaches the member as tax they did not have to pay, through a Self Assessment return or a tax code adjustment, so it reduces the cost of the contribution without increasing the pension. The page shows it in the cost panel and keeps it out of the projection, which is the distinction a calculator that added it to the pot would quietly get wrong in the reader’s favour.

Relief is priced for one year, and deliberately not multiplied by the term

Relief is annual, and it is given at the rates, thresholds and income of the year the contribution is paid in. A page that took one year’s relief and multiplied it by twenty-five would be asserting that today’s rates, today’s thresholds and today’s salary all hold for twenty-five years — a claim about the future wearing the clothes of arithmetic.

So the relief panel prices one year and says so, and the only figure carried across the whole term is the basic-rate relief the provider adds, because that is money that genuinely entered the pension and is in the schedule. The term table reports it as part of what went in rather than as a saving.

The conventions the pot is compounded under

period          = one month
contribution    = at the START of each period
growth basis    = effective: twelve monthly steps compound to the annual rate
charge          = a percentage of the value, taken every month
balance         = integer pence at every step

Each of those changes the answer and most calculators state none of them. A contribution paid at the start of a period earns one extra period of growth, every period, for the whole term — which is right for a standing order into a SIPP and wrong for a save-what-is-left habit. An effective basis means twelve monthly steps compound to exactly the annual rate you typed; a nominal basis would compound to more than it, which is the unstated convention this site exists to correct.

The charge is taken inside the loop rather than deducted at the end, so it compounds against the reader exactly as it does in a real account, and it takes its largest bite in the final years when the pot is biggest.

Why the term column is not a straight line

£300.00 a month for 15 years puts £67,500.00 into a SIPP and, on the rate this page opens with, compounds to £96,011.15. The same contribution for 30 years puts in £135,000.00 — twice as much — and compounds to £282,580.85, which is a great deal more than twice.

The extra years are the ones with the largest balance in them, so they carry the most growth. That is the whole of the compounding argument, and it is also the whole of the assumption: at a growth rate of nothing the two columns would move together exactly. The page shows the table rather than making the claim.

The other end, and why the pot is stacked rather than taxed alone

A quarter of the pot is normally free of income tax and the rest is taxed as income when it is taken. This page prices taking the whole taxable part in a single tax year, stacked on the reader’s other income for that year, and it does that because it is the version people picture when they say they will take their pension — and because the figure is the argument against doing it.

Stacking matters more than it looks. Taxing a pot in isolation is right only for somebody with no other income at all, and almost nobody in retirement is that person: the state pension alone puts most readers well into the personal allowance before a private pension pays anything. So the tax attributable to the pot is measured — the position with it, less the position without it — rather than derived from a rate.

Two things this page will not do. It does not apply the allowance capping tax-free cash, because that figure is listed in packages/tax-core/VERIFICATION.md among the figures the package does not model — so on a large pot the tax-free amount shown is too high, which is the direction that costs the reader money and is stated next to the answer rather than here. And it does not model the minimum pension age, so it will price a withdrawal at a term nobody would be allowed to take one at.

Rates and allowances

The tax-free rate is 25.00% and is verified. The cap on it is not in this software at all. No figure in the projection appears in this table, because there is none to appear.

Sources

• gov.uk — Tax on your private pension contributions: pension tax reliefRelief at source, the limit on relievable contributions, and what a higher-rate or additional-rate taxpayer has to claim themselves.
• HMRC — Pensions Tax Manual PTM044220, relief at sourceThe grossing-up arithmetic, and that a non-taxpayer keeps the relief the scheme reclaims.
• Finance Act 2004 s.192 — relief at source and the rate limits it increasesThe mechanism by which relief above the basic rate is given. PTM044220 works the arithmetic without stating it.
• gov.uk — Tax when you get a pensionThat a quarter of a pot is normally tax-free and the rest is taxed as income, and the allowance capping tax-free cash — which this calculator does not apply.
• gov.uk — Pension annual allowanceThe other limit, not applied on this page.
• gov.uk — Income tax rates and allowances: current and past
• gov.scot — Scottish income tax rates and bandsThe published page still titles its table “Proposed Bands”. The bands are in force: the Scottish Parliament agreed the Scottish Rate Resolution, motion S6M-20844, on 19 February 2026.

Six things this calculation does not model, stated here rather than buried

• Anything about how returns actually behave. One rate, every period, no order, no volatility, no sequence risk. The stated conventions make the arithmetic checkable; they do not make it a forecast.
• The cap on tax-free cash. The rate is verified and the allowance capping it is not held by this package, so a large pot shows too much tax-free cash and too little tax.
• The annual allowance, its taper for high earners, the money purchase annual allowance and carry forward. Only the limit on relief is applied here.
• The minimum pension age, which is rising, and any protected pension age. The page will price a withdrawal at a term it is not legal to take one at.
• Drawing the pot over several years, which keeps more of it in the lower bands and is what most people do. That is a drawdown calculation and has its own page.
• Employer contributions, other pensions, contribution increases, contribution gaps, transfers, fund charges and dealing costs — every one of which changes the answer, and most of which make it smaller.