Director pension vs dividend calculator
Compare putting company profit into a pension against drawing it as dividends and investing personally, over time.
Pension vs dividend, compared
Change the numbers, the results update instantly.
Illustration only, not a prediction or recommendation. Growth rates are never guaranteed and pensions carry their own rules and charges. Always take regulated advice before acting.
How it works
Pension route: the full amount is paid into the pension as an employer contribution, which is deductible against corporation tax, so it does not reduce the amount invested. It then compounds at your chosen growth rate until retirement. Dividend route: the amount is first reduced by corporation tax, then the remainder is drawn as a dividend and taxed at your marginal dividend rate, before the net amount is invested and compounds at the same growth rate. This illustrates the structural advantage of the pension route; it is not advice on whether a pension is right for you. It's a conversation we have often as part of our limited company accounts service, where extracting profit efficiently is part of the year-end planning.
Frequently asked questions
Why does the pension route usually win?
Because employer pension contributions are corporation tax deductible and are not subject to dividend tax on the way in, more of the original amount ends up invested compared with drawing it as a dividend first.
Is this a recommendation to use a pension?
No. This is a simplified illustration of the maths, not advice. Pensions have contribution limits, access restrictions and tax rules on withdrawal that this tool does not model.
What is the annual pension allowance?
For most people it is £60,000 a year for 2026/27, though it can taper down for very high earners. Contributions above your allowance can trigger a tax charge, one of several traps we cover in our tax-efficient salary guide.
Does this account for tax when the pension is eventually drawn?
No, this tool compares the two routes up to retirement only. Pension withdrawals are taxed under their own rules, which are not modelled here.
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These results are a simplified illustration based on 2026/27 rates, not advice. Growth rates shown are illustrations only, not predictions or recommendations of future performance. Your real position depends on your full circumstances. For a personalised answer, book a free consultation.
Numbers looking complicated?
A calculator gives you an estimate. A free call gives you a plan. Book one and we'll work through your actual situation.