Projection question

tony4147

I recently asked my IFA for a projection for when I’m 65, I now 50 y/o.
My total plan values of 3 plans is £112,000.
The total contribution into 1 of the plans is £500/month, there are no contributions into the other 2 plans.

The projection states a pension total plan value of £223,200 giving me a pension of £7590/yr in today’s terms, based on no lump sum, single life annuity increasing by RPI with a 5 yr guarantee, growth rate 5% with a 1% amc, 2.5% inflation, no increase in pension contributions.

Does £7590 sound about right? The no increase in pension contributions is something the IFA has assumed, I always increase my contributions every year.

I was planning on increasing my contributions to £700/month but I’m very uncomfortable with this projection as if I were to take an annuity TODAY with the plan value of £112,000 I would get £4236+ from Aviva which even though it's not great it doesn't look too bad in comparison to the projections for 15 years time and all the additional contributions paid in.

Using the HL calculator I get a pension of £9768, although this assumes that the £500/month contribution is increased by 2.5%/yr.

I'm struggling to get a handle on the projections, I want to save for retirement but often think then I'm throwing good money after bad? am I

GhIFA

What does your IFA say?

You're not comparing on the same bases, so you can't make a meaningful judgement. Your IFA has all your relevant details, we don't, so any comment made here is going to be flawed.

Ask him for revised projections on the basis you want. You may well increase your projections every year, but is this always by the same amount? If not, it is very difficult to make an accurate assumption for this.

The HL projection you have got is also, to all intents and purpose, irrelevant as again it is on a different basis to the others.

tony4147

GhIFA wrote: »

What does your IFA say?

You're not comparing on the same bases, so you can't make a meaningful judgement. Your IFA has all your relevant details, we don't, so any comment made here is going to be flawed.

Ask him for revised projections on the basis you want. You may well increase your projections every year, but is this always by the same amount? If not, it is very difficult to make an accurate assumption for this.

The HL projection you have got is also, to all intents and purpose, irrelevant as again it is on a different basis to the others.

Well does the £7590 sound right? (based on the information I've given)

GhIFA

What does the projection show as the monetary income (i.e. before making an allowance for inflation to show in today's money)?

tony4147

GhIFA wrote: »

What does the projection show as the monetary income (i.e. before making an allowance for inflation to show in today's money)?

It shows £112,000 plan value now and £500/month for the next 15 years

GhIFA

tony4147 wrote: »

It shows £112,000 plan value now and £500/month for the next 15 years

No, what does the projection show as the income that will provided by the fund at retirement - the actual monetary income - not the £7,500ish shown in today's money?

tony4147

GhIFA wrote: »

No, what does the projection show as the income that will provided by the fund at retirement - the actual monetary income - not the £7,500ish shown in today's money?

sorry, no it is only shown in today's money not monetary value

GhIFA

Sorry, had a brain freeze, and asked an additional question that wasn't needed.

The rates would certainly look around the standard available in the market at the moment.

However, as I said earlier (and also based on your previous posts about projections), looking at projections on differing bases is only going to confuse - speak to your IFA, ask him/her to explain it further, decide with them exactly what you want, and let them get that. That's what they're getting paid for!

It's very difficult to make anything other than generic comment on a thread such as this, as there are too many other details and variables about your situation we do not know.

mania112

Projections can be concentrated on too much, let's not forget - it's a guess.

What we do know is that your contributions are met with tax relief. If you pay 40% income tax, you'll get 40% tax relief. When you retire you'll be subject to income tax taking it out (after the Pension Commencement Lump Sum, if taken) but you might only be 20% then, so there's saving to be made.

We also know that an Annuity is not your only retirement option. So if Annuity rates are poor when you retire, there is an alternative (called Drawdown) which you can use until rates improve.

We also know that a pension is the best way to save for retirement.

tony4147

GhIFA wrote: »

Sorry, had a brain freeze, and asked an additional question that wasn't needed.

The rates would certainly look around the standard available in the market at the moment.

However, as I said earlier (and also based on your previous posts about projections), looking at projections on differing bases is only going to confuse - speak to your IFA, ask him/her to explain it further, decide with them exactly what you want, and let them get that. That's what they're getting paid for!

It's very difficult to make anything other than generic comment on a thread such as this, as there are too many other details and variables about your situation we do not know.

I not changing the criteria for the projections, I'm trying to base everything on what my IFA has quoted, as per my original post.

GhIFA

tony4147 wrote: »

I not changing the criteria for the projections, I'm trying to base everything on what my IFA has quoted, as per my original post.

But your original post also brought in other projected figures that weren't comparable as they weren't on the same basis.

Your IFA has provided the projections, he/she is really the one best placed to answer any queries you have and give any clarifications.