Question 1

How does this calculator compare pension versus lump sum?

Accepted Answer

It projects two outcomes over your chosen time horizon: the lump sum invested and left to compound at your expected return, versus each monthly pension payment being reinvested at the same rate as it is received (like a SIP). Whichever grows to a larger value under your assumptions is shown as the better choice.

Question 2

Which option should most people choose?

Accepted Answer

There is no universal answer — a lump sum gives you full control and the potential for higher growth if invested well, while a pension provides certainty and removes the risk of mismanaging or outliving a lump sum. This calculator only compares the pure numbers; personal risk tolerance and discipline matter too.

Question 3

Does this account for tax differences?

Accepted Answer

No — lump sum payouts and pension income can be taxed differently depending on the source and applicable rules. This calculator compares only the gross growth potential; consult a tax advisor for the actual after-tax comparison.

Question 4

What if I need guaranteed income rather than growth?

Accepted Answer

If your priority is a reliable income floor rather than maximising growth, the monthly pension may be preferable even if the lump-sum-invested figure comes out higher on paper, since markets can underperform your assumed return.

Pension vs Lump Sum Calculator

Made your choice? Let's plan around it

What is a Pension vs Lump Sum Calculator?

Frequently Asked Questions

Related Calculators