Ask how a pension is calculated and the honest answer is that it depends which kind of pension you mean. A defined contribution pension — a workplace or personal pot — is a sum of money that grows: what you put in, what your employer puts in, and the growth on both, compounded over the years. A defined benefit pension — a final-salary or career-average scheme — is a promise: an annual income fixed by a formula, not by a pot. And on top of either kind sit the state benefits, which are calculated by yet another set of rules and differ by country. This guide works through all three, with the numbers shown, so the projection on the calculator is a figure you can follow line by line.

Two kinds of pension

The first thing to settle is which kind of pension the question is about, because the two kinds are calculated in entirely different ways. A defined contribution pension is a pot: you and your employer pay in, the money is invested, and what you get at the end is whatever the pot has grown to. The calculation is a projection, and the answer depends on the growth rate you assume. A defined benefit pension is a promise: the scheme guarantees an annual income for life, fixed by a formula based on your salary and your years of service, and the calculation is exact, not a projection.

Most people reading this guide have a pot — a workplace defined contribution scheme, a 401(k), or a personal pension — so the pot formula comes first. The defined benefit formula follows, and then the state benefits, which sit on top of either kind and are often the part people forget to count.

The pot formula

A pension pot grows in two parts, and the formula keeps them separate. The current pot compounds on its own, month by month, at the growth rate. Every contribution compounds too, but only for the months it stays invested — a contribution paid in the first year has twenty-five years to grow, and a contribution paid in the last year has one month. The future value is the sum of the two parts.

Written out, with P for the current pot, C for the monthly contribution, r for the monthly growth rate, and n for the number of months: future value = P × (1 + r)^n + C × (((1 + r)^n − 1) / r). The monthly rate is the annual rate divided by twelve, and the number of months is the years to retirement multiplied by twelve. Fees and inflation are left out of the basic formula — the calculator lets you add them in Advanced options — and the growth rate is an assumption, not a promise: real investment returns vary year by year and are not guaranteed.

Worked example: $50,000, $450 a month, 5%, 25 years

The calculator’s default example is a $50,000 pot, $450 a month in contributions — yours plus your employer’s — at 5% a year for 25 years, and it projects to $442,043.89. The split shows where the money comes from: the $50,000 pot on its own grows to $174,064.52, and the $135,000 of contributions — $450 a month for 300 months — grows to $267,979.37. Total growth is $257,043.89, which is more than the $185,000 paid in altogether. That is compounding doing the heavy lifting: the growth is larger than the money put in.

Two things about the example are worth noticing. First, the employer’s share matters as much as your own: the $450 a month is the combined contribution, and the employer’s part is money you would not have if you opted out. Second, the growth rate dominates the answer — which is why the next section varies it and nothing else.

What changes the answer

Three inputs move a pot projection: the growth rate, the contribution, and the time. The growth rate moves it most, because it compounds. Holding the $50,000 pot and the $450 a month fixed and changing only the annual growth rate over 25 years gives three very different pots — and the gap between them is the reason a cautious growth assumption matters more than an optimistic one.

Projected pot after 25 years: $50,000 starting pot, $450 a month, monthly compounding.

Time is the second lever: the same contributions paid for 30 years instead of 25 grow for five more years, and the extra growth lands on the whole pot, not just on the new contributions. Contributions are the third lever, and the most controllable one: every extra dollar a month is a dollar plus its growth, and an employer match doubles it before growth even starts. The calculator lets you move all three and watch the pot respond.

How much will I get?

A pot is a lump sum, and the question that follows is what income it buys. The calculator shows a 4% example: 4% of the projected pot per year, divided by twelve. On the $442,043.89 example pot that is $17,681.76 a year, or $1,473.48 a month. It is an illustration of scale, not a drawdown plan — it takes no account of tax, of how long the pot must last, or of whether the money is drawn down gradually or used to buy an annuity, and the companion guide on drawdown and commutation works those choices in full.

The honest answer to ‘how much will I get’ is therefore two numbers, not one: the pot, and the state benefits on top of it. The pot is yours to project; the state benefits are fixed by rules, and the next three sections set out the rules for the UK, Canada, and India.

The UK: the State Pension on top

The UK State Pension is not calculated from a pot at all. The full new State Pension — for anyone reaching State Pension age on or after 6 April 2016 — is £241.30 a week in 2026/27, or £12,547.60 a year, and it needs 35 qualifying years of National Insurance contributions. Each qualifying year is worth one thirty-fifth of the full rate, or £6.89 a week; below 10 qualifying years there is no new State Pension at all. The amount is uprated each April under the triple lock — by the highest of average earnings growth, CPI inflation, or 2.5% — which is how it rose 4.8% from £230.25 in 2025/26 to £241.30 in 2026/27.

The State Pension is taxable income, and at £12,547.60 a year it sits just £22.40 below the £12,570 personal allowance, so a full State Pension on its own is almost exactly tax-free, and any other income on top of it is taxed from the first pound above the allowance. Deferring the State Pension increases it by just under 5.8% a year. Your own forecast — the exact figure for your record — is on GOV.UK’s Check your State Pension service.

Canada: CPP and OAS

Canada’s government benefits come in two parts. The Canada Pension Plan is contributory: the monthly amount depends on how much and how long you contributed, up to the Year’s Maximum Pensionable Earnings, which is $74,600 in 2026. The maximum CPP retirement pension starting at age 65 is $1,507.65 a month in 2026 — $18,091.80 a year — but most people receive less: the average new retirement pension at 65 is $858.34 a month. Taking CPP early, from age 60, cuts it by 0.6% a month; delaying to 70 raises it by 0.7% a month.

Old Age Security is residency-based, not contributory: most Canadians aged 65 and over who have lived in Canada for at least 10 years after age 18 qualify. The maximum OAS is $762.50 a month for ages 65 to 74 and $838.75 from age 75, for the October to December 2026 quarter, indexed quarterly. OAS is clawed back at 15 cents per dollar of net income above the recovery threshold. CPP and OAS together are a floor, not a plan — the maximum of both at 65 is about $2,270 a month, and the average is well below that.

India: EPF and EPS

India’s main retirement saving for salaried employees is the Employees’ Provident Fund. The employee contributes 12% of basic salary plus dearness allowance every month, and the employer contributes another 12% — but the employer’s share is split: 8.33% of wages goes to the Employees’ Pension Scheme (EPS), and the rest goes to the EPF account. The EPF interest rate for FY 2025-26 is 8.25% a year, set by the EPFO and reviewed annually. The wage ceiling for mandatory EPF coverage was raised from ₹15,000 to ₹25,000 a month with effect from 17 September 2026.

The EPS pension itself is calculated from pensionable salary and pensionable service — broadly, the average monthly wage over the service period multiplied by the years of service and divided by 70 — and it is paid from age 58, with a reduced pension available from age 50. The National Pension System (NPS) is the other pillar: a market-linked, defined contribution account whose pension depends on the corpus built and the annuity bought with it. The EPF, the EPS, and the NPS are three different calculations, and the total is the sum of them, not any one of them.

Defined benefit: the other formula

A defined benefit pension is calculated by a formula, not by a pot. The usual form is: annual pension = accrual rate × pensionable salary × years of service. The accrual rate is the scheme’s fraction — commonly 1/60th or 1/80th of salary per year of service. On a pensionable salary of $60,000 with 30 years of service and a 1/60th accrual rate, the annual pension is $60,000 × 30 ÷ 60, or $30,000 a year. The exact accrual rate, the definition of pensionable salary, and the retirement age are set by the scheme, and the scheme’s statement — not a calculator — is the authority for the figure.

The two kinds of pension answer different questions, and most people have one of each in their history: a pot from recent jobs and a promise from an older one. Add the pot projection, the defined benefit promise, and the state benefits together, and the total is the pension — which is why the calculator’s projection is labelled a projection, and why it says to add the government benefits on top.

Frequently asked questions

What is the pension calculation formula?

For a defined contribution pot, the future value is the current pot grown by monthly compounding plus every contribution grown for the months it stays invested: FV = P × (1 + r)^n + C × (((1 + r)^n − 1) / r), with r the monthly growth rate and n the months to retirement. For a defined benefit scheme, the annual pension is the accrual rate × pensionable salary × years of service. State benefits use their own rules on top of both.

How do I calculate how much pension I will get?

Project the pot with the formula above, turn it into income with the 4% illustration — 4% of the pot per year — and then add the state benefits: the UK State Pension, Canada’s CPP and OAS, or India’s EPF and EPS, depending on the country. The Pension Calculator does the pot projection; your government forecast gives the state part.

Is pension calculated on gross salary?

It depends on the scheme. Contributions are usually calculated on pensionable pay, which is often basic salary and may exclude overtime, bonuses, and allowances — the scheme rules decide what counts. A defined benefit pension is calculated on pensionable salary, not on total gross pay, and the definition varies by scheme. Check the scheme booklet for what counts as pensionable.

How do I calculate my pension value?

For a pot, the value is the current balance plus future contributions grown at an assumed rate — the calculator’s projection. For a defined benefit scheme, the value is usually quoted as a transfer value (CETV) by the scheme, which is the lump sum the scheme would pay to move the promise elsewhere. For divorce, the court uses the CETV, not a hand calculation.

How much pension will I get in 2026?

That depends on the pot and the country. The UK full new State Pension is £241.30 a week in 2026/27 with 35 qualifying years. Canada’s maximum CPP at 65 is $1,507.65 a month in 2026, with the average new pension at $858.34. A pot of $442,043.89 — the calculator’s example — gives $17,681.76 a year at the 4% illustration. No figure here is a personal promise: the pot depends on growth, and the state figures depend on your own record.

What is the 4% rule?

The 4% rule is an illustration, not a guarantee: take 4% of the pot in the first year of retirement and the same amount, adjusted for inflation, each year after. It comes from US research on how long a portfolio lasts, and it is used here only to show the scale of the income a pot represents — $17,681.76 a year on a $442,043.89 pot. Real drawdown depends on growth, fees, tax, and how long the money must last.

Figures: GOV.UK (State Pension 2026/27); Service Canada (CPP and OAS 2026); EPFO (EPF 8.25% for FY 2025-26). Checked October 2026.