How big should my pension pot be ?

russ311 · 27 August 2009 at 8:53AM

I'm trying to find an easy way to see if I'm on track with my pension. Does anyone know of a calculator that allows me to say (a) how old I am (b) how big my current pension fund is (c) how much I'd like to have when I retire and (d) how old I expect to be when I retire.

If not then I'm 40 (ish), have a fund of around £35k and would like to retire at 67 with £1000 per month. Can anyone tell me if I'm on target ?

bendix · 27 August 2009 at 8:57AM

How much do you contribute each month?

russ311 · 27 August 2009 at 9:06AM

Currently £225 employer contribution with nothing from me but this is increasing to £262.25 from my employer plus £112.50 personal contribution (£374.75 total) from 1st Sept.

worto03 · 27 August 2009 at 9:30AM

http://www.h-l.co.uk/pensions/pension-calculator

This might be the sort of thing your looking for?

McKneff · 27 August 2009 at 9:39AM

In 27 years time, you'll be able to buy a couple of loaves with £1000 a month.;)

bendix · 27 August 2009 at 9:39AM

The HL calculator says you're pretty much on track, assuming you get 7% per annum growth. You'll have a pot woth £540k which will give you an income of around £25,000 per annum, but you have to remember that that is in future value money. Given pretty average inflation rates of around 2.5% per annum, that will give you around £12000 per annum in today's terms.

Personally, I'd be erring on the side of caution and increasing my payments now while you can, to at least matching the employer's contribution.

At the age of 40, you need to be contributing 15-20% to be safe.

dunstonh · 27 August 2009 at 9:45AM

Your current pension provider will be able to tell you how much you have as a pension fund and how much it could be using example growth rates to a specific age.

A rough yardstick is £35k by age 35 but that doesnt take into account the fact that some pay less initially and more later etc.

For income purposes, it is a good idea to use 5% of the fund value as guide to income.

So,if you want £12,000 a year, that means you take (£12,000 / 5) /*100 = £240,000 investment fund.

You also need to take inflation into account as £12,000 wont have the spending power at age 67 as it does at 40 (ish). It will probably be closer to around £5,000. So, you need to factor that in as well by increasing the pot value. Of course, investment returns can go some way to cover inflation as well as increasing your contributions with inflation. However, far too many people dont increase their premiums.

worto03 · 27 August 2009 at 10:13AM

I'm only just getting the hang of this myself so correct me if I'm wrong but you should also get your state pension ontop of anything from your company pension which should help too

russ311 · 27 August 2009 at 10:28AM

Thanks all, it's good to see that I'm not too far off being able to survive when I retire. The calculator provided by worto03 seems particularly useful and easy to use but thanks to all who've responded.

marklv · 27 August 2009 at 12:34PM

You'll survive, but make sure you monitor your investments closely. Don't put everything into the stockmarket or you could face a nasty shock - ensure a good portion of your fund goes into gilts/bonds. I also feel a 7% per annum growth rate is a little optimistic.

bendix · 27 August 2009 at 1:46PM

marklv wrote: »

You'll survive, but make sure you monitor your investments closely. Don't put everything into the stockmarket or you could face a nasty shock - ensure a good portion of your fund goes into gilts/bonds. I also feel a 7% per annum growth rate is a little optimistic.

He's got 26 years to go before retirement. Plenty of time to ride out a few bumps in the stockmarket.

At that age, he should be at least 75% in stocks, with a chunk of that overseas and in emerging markets.

How big should my pension pot be ?

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