The formula
How it works
Estimate the annual income from a defined-benefit pension. Enter your final average salary, your years of service and the scheme’s accrual rate to see your yearly and monthly pension and the share of salary it replaces.
FAQ
What is an accrual rate?
It is the fraction of your salary you earn as pension for each year of service, often quoted as 1/60th (about 1.67%) or 2%. Multiply it by your years of service to get the proportion of your final salary the pension pays. A 2% rate over 30 years replaces 60% of salary.
What is “final average salary”?
Most defined-benefit schemes base the pension on an average of your salary near retirement — often the final year or the best few of your last several years — rather than your whole-career average. Enter the figure your scheme uses; a career-average scheme would use a different, usually revalued, salary.
How does this differ from a career-average pension?
A career-average scheme applies the accrual rate to your salary in each individual year rather than your final salary, then revalues those amounts for inflation. This calculator assumes a final-salary structure, so for a career-average plan the result is only a rough approximation.
Does this pension keep pace with inflation?
This calculator shows the pension in today’s terms and does not model annual increases. Many defined-benefit schemes apply some form of inflation-linked uprating once the pension is in payment, so check your scheme’s specific indexation rules for the real long-term value.
How is this different from a defined-contribution pension?
A defined-contribution pension builds up a personal investment pot whose eventual size depends on contributions and investment returns, with no guaranteed income. This calculator instead models a defined-benefit pension, which promises a set income for life based on salary and service rather than market performance.
Does retiring early reduce the pension?
Yes — most schemes apply an early-retirement reduction if you draw the pension before its normal retirement age, since it will be paid for more years. This calculator does not apply that reduction, so an early payout would be lower than the figure shown.
Does the pension continue to a spouse or dependant?
Many defined-benefit schemes pay a reduced survivor’s pension, often around half the member’s amount, to a spouse, civil partner or dependent child after death. This calculator estimates only the member’s own pension and does not include any survivor benefit.
About the pension calculator
This calculator estimates the income from a defined-benefit (final-salary) pension — the kind that pays a guaranteed amount for life based on your salary and length of service, rather than the size of an investment pot. It multiplies your salary by your years of service and the scheme’s accrual rate to give the annual pension, then shows it monthly and as a percentage of your salary.
How to use it
Enter your final average salary, your years of pensionable service and the accrual rate your scheme uses. The calculator shows the annual pension, the monthly equivalent and the replacement ratio — how much of your salary the pension replaces. For example, a $60,000 salary with 30 years of service at a 2% accrual rate produces a $36,000-a-year pension, replacing 60% of salary.
The formula
A final-salary pension is . The accrual rate and years multiply together into a replacement fraction of salary, so more service or a more generous rate raises the pension proportionally. The monthly figure is simply the annual pension divided by twelve.
Where it is used
Employees in defined-benefit schemes — common in the public sector and older corporate plans — use it to project their retirement income and decide when they can afford to retire. It helps compare a pension against a salary, and to see the value of staying a few more years for extra accrual. Alongside a savings or annuity calculator, it builds a full picture of retirement income.