1 .Enter the rate
of accrual as 60 if you are in a 1/60th scheme, 80
if 1/80th etc. Enter 1 if this section is not applicable:
2. Enter the
total number of years service you expect to have by the
time you want to retire. Enter 0 if not applicable:
3. What is your
salary as defined by the pension scheme? Normally only
includes basic pay, no bonuses or overtime. Enter 0 if
not applicable:
4. Enter the
current value, in total, of your pension funds, plus any
other plans that you are treating as pension savings, e.g.
12000. Enter 0 if none:
5. Enter your current
monthly investment , to all of the above.
Use GROSS contribution values for pension investments, e.g.
150. Include any Employer contributions:
6. Enter the
number of complete years to retirement:
7. Enter your
assumed growth rate, e.g. 9 for 9%:
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2
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4
5
6
7
8
9
10
11
12
13
14
15
8. Enter your
assumed inflation rate, e.g. 5 for 5%:
0
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2
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4
5
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8
9
10
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15
9. Enter your desired
annual retirement income
10. Enter your
expected annuity rate.
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2
3
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5
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7
8
9
10
11. Projected
Pension* Fund:
12. Projected
Pension * using your annuity rate:
13. Projected Fund
in real terms
14. Projected
Pension in real terms using your inflation and annuity
assumptions for fund based pensions, with any Defined
Benefit pension added:
*This calculator assumes that
you use the whole fund for pension. In reality you
may take some of it as tax free cash.
Accrual
Rate - The rate at which you accumulate
pension for each year of service. You need
to know this. Guessing is very risky as it
may lead to an over optimistic assessment of
your pension position. That said most good
schemes provide one sixtieth of salary for
each year of service, (hence the oft quoted
pension being 40/60, i.e. two thirds of salary
for 40 years service with the same employer)Expected
Years Service by Retirement - This refers
to any time that you have spent or will spend
in a good company defined benefits scheme (one
that pays you a pension according to the number
of years service, rather than according to the
size of any fund that you may accumulate). Most
large employer schemes are of this type.
If you have been in such a scheme for ten years,
and expect to stay until retirement in twenty
more, then enter 30.
If you have spent five years with such an employer
and then left, enter five. However note that
this calculator assumes that your current salary
is the relevant one, whereas in fact presumably
your scheme salary was lower. In this case the
calculator will OVERESTIMATE your pension.
If you have benefits from such a scheme and
want to see how they affect you then run the
calculator using the term, the salary value that
you had when you left the scheme, and the term
to retirement that applied when you left the
scheme. This will be more accurate, but still
not to be relied upon.
Value
of Current Investments - The current value
of all of your long term savings, be they pension
funds, shares, deposits etc. EG if £12,000
in pensions, £3,500 in ISAs/PEPs and £12,000
in deposits/shares etc enter 27500.Savings
Rate - How much each year you are setting
aside for long term investment, either explicitly
to pensions, or implicitly in general savings.
If your arrangements seem to be falling short
of your desired pension you need to adjust this
figure to see how much you need to invest to
meet your target. Include any employer pension
contributions if known.Inflation
and Growth Assumptions - Choose your own,
but note that the highest growth rate allowed
in formal projections is 9% (for which inflation
is assumed to be 4.5%) and the cautious one is
5% (with inflation of 0.5%). As well as the absolute
levels of each, it is important to understand
that over the long term there cannot be a huge
difference between growth and inflation, and
differentials of over 4.5% will lead to over
optimistic pension projections.
Because of the way that the math operates there
is an added complexity when considering the effect
of Inflation on Regular Savings. In short if
you invest £1000 a year then , because
of inflation, it appears that each year you invest
less and less in real terms. If you want to se
what happens if you invest the same amount in
real terms then set the Inflation at 1, and use
a conservative growth rate.
Enter in the form 1.06 for 6%.
In the internal math the growth rate is reduced
by 1% to represent fund charges, as per Stakeholder.
Your actual pension costs may be different.
Annuity
Rate - Choose your own assumption, but if
you want to be cautious then 6-7% is a good guide.
Enter as a decimal, e.g. 0.07.Desired
Pension - The annual pension you would like
if you were to retire today.Projected
Pension Fund - The value of the fund at retirement.Projected
Pension - The pension that the fund will
provide for your selected annuity rate.Fund
Value in Real Terms - The value of the fund
in today's money.Pension
Value in Real Terms - This is the number
that counts. The value in today's terms of your
pensions, both from any fund, and from any employers
scheme. State Pensions are ignored.
This calculator, and
the figures shown by it, are for illustrative purposes
only and should not be relied on. For more detailed
information based on your own circumstances, please
speak to your financial adviser.
