We modelled the epidemiology and cost of pneumococcal disease in children in the UK and the cost-effectiveness of immunisation with 7-valent pneumococcal conjugate vaccine (PCV). We estimated the incidence of pneumococcal meningitis, pneumococcal septicaemia, all-cause pneumonia and all-cause otitis media (OM). We further estimated the impact of vaccination with associated costs and outcomes. Vaccine cost was pound 39.25 per dose with a pound 10 administration cost; vaccination schedule and efficacy were taken from a recent trial. We estimated that in each UK annual birth cohort there are 881,146 episodes of these infections and 149 deaths associated with pneumococcal meningitis, pneumococcal septicaemia or all-cause pneumonia and that PCV would prevent 54,384 episodes and 29 deaths. NHS cost per life year gained was estimated at pound 31,512, close to the limit at which PCV would be considered cost-effective.