pension pot size?

jamesd

tony4147 wrote: »

So when using the HL calculator what would be a reasonable growth rate figure? should people be using the standard figure of 7% for growth rate or should they be using the 5% figure?

First, just get started, whatever else you do. We're discussing a 55+ year timeframe and one of the few certainties for that time frame is that nothing we write today can prudently be relied upon. You need to regularly monitor and adjust over the years.

For the actual values to use in projections the real correct answer is that you should learn more about historic values and the basis of projections and decide for yourself. Then monitor your own performance as an investor and adjust appropriately.

If you just want a number, go with the existing values for a central projection, the pessimistic new one for a less good long term result and maybe even another more pessimistic one as well. Then go and experiment with Firecalc and see what past variation in investment returns requires in the way of safety margins. And then ignore all of that if your monitoring and changing conditions make the assumptions that seem valid today invalid in the future.

To get historic context, see the Barclays Capital Equity Gilt Study and pay particular attention to the variations in returns over the years and the way longer periods reduce variability overall.

Also note that with pension investing you have many start points but for any annuity purchase only a few end points. With drawdown your have many more end points so your investment risk is reduced compared to a fixed annuity purchase date. You can get closer to that with annuities by planning to buy them in smaller chunks as you get older, so you have a different end point for each purchase. The end points matter because they could be during an investment downturn. You can do things to protect against that but it's still worth paying attention to the significance and undesirability of a single fixed end date.

To improve the outcome for you, one of the best things you can do is start to learn about investing, so you don't end up in default portfolios or default balanced managed funds.

There's no huge urgency to doing this learning. Just get started and do it gradually over the next few years and you'll be way ahead of most people in your potential results.