My Pension looks rubbish

geraint85

I'm 28 Years old, and my wage is £21,500 a year. I'm paying in 10% and my employer is paying in 5%. My Retirement age is set at 65. I've calculated that without any interest, me and my employer will contribute £119,325 in this time.
However, My pension statment has given me an estimate of £107,000 at retirement, giving me just £3,100 yearly income.

Is it predicting that through investment, they'll lose money?
I thought I was paying in alot, and it doesn't seem to be amounting to much.

dunstonh

Is it predicting that through investment, they'll lose money?

It is not a prediction. It is a projection based on a range of assumptions. One of those assumptions could easily be showing a negative figure. Especially if its a recent one.

What at the projection assumptions?

geraint85

Thanks for your reply. below is whats written in the assumptions. it is a recent one (it came through the post today). It doesn't make much sense to me. I'm worried that the investment over the 37 years i have remaining wont give me anything.


Assumptions when calculating your proections up to your selected retirement date including ;

Growth Rates to show how investments in your mension fund might grow
A rate of inflation of 2.5% each year
Any regular contributions to your plan continue to be paid on the same basis
you remain invested in the same investment funds or lifestyle profile
the rates of charges taken remain the same

bristol_pilot

In particular, does the projection assume you and your employer will continue to contribute at the same rate until you retire or does it assume that no further contributions will be made but the existing pot will be left to grow? Companies can use either assumption and indeed switch between the two from one year to the next.

If it's the former assumption, your pension is pants. Are you invested in a cash fund? If so, charges could exceed projected growth. You should be in 100% equities at your age IMO.

geraint85

Yes, I think the projection assumes that the employer will continue to contribute at the same rate. the below figure adds to 15% of my wage, which is my 10% and my employers 5%.
My pension is with Legal & General.


Contribution Assumptions
We've based our proections on a regular gross cotrobution of £268.75 paid each month.
We've assumed that regular contributions remail regular.

bristol_pilot

You could ask for the figures and assumptions to be checked. I recently questioned my pension projection statement and there was a massive error due to a change in assumptions that was not reflected in the statement of assumptions - the projected pension was out by a factor of three!

bristol_pilot

What fund is it invested in? I'd remove the name of your employer from this thread btw.

geraint85

Its invested in the Cautious Distribution Lifestyle profile.

"Initially invested in the Distribution fund. When youre 10 years from retirement date, we'll gradually switch your fund every three months into the over 15 year glits index fund and the cash fund"

Name of employer removed. thanks for the advice.

[Deleted User]

You're the only person that can decide about your own tolerance of investment risk, but... a cautious investment approach at 28 is a sure fire way to grossly limit the potential returns, which will be why the projected pension is so low. If you want to make money you're going to have to expose yourself to some risk.

dunstonh

The low projection figures can actually give a negative return. if you had say a 1.4% low growth rate (which would be about right for cautious) and an inflation rate of 2.5% then the projection at that level would show a loss.

ffacoffipawb

citricsquid wrote: »

If you want to make money you're going to have to expose yourself to some risk.

Unless you are Max Clifford, in which case if you want to make money you're going to have to expose yourself.