Pensions calculator

Jaguar_Skills

Using pensions calculators it always asks for annual growth %'s.

Now this is obviously very difficult to predict. What would you suggest for this?

I'm just trying to do a basic calculation of if I place £600 a month into a SI PP and £400 a month into an ISA for 30 years what this would roughly be worth on retirement.

Linton

You need to estimate both the investment return and inflation, or equivalently work completely in present values and use a real investment return ie return - inflation.

I suggest you use a pessimistic worst case value and an optimistic one so that if your plan works with the pessimistic return you are pretty safe and if it doesnt work with the optimistic one you need a fundamental rethink. In between you can go ahead monitoring the situation.

In my case the plan worked for an investment return of 1% above inflation which in practice has proved to be over pessimistic. For an optimistic value you could use something like 5% above inflation.

Note that these values are for S&S investments. For cash investments use a real return of zero (or a bit less).

TH1878

Jaguar_Skills wrote: »

Using pensions calculators it always asks for annual growth %'s.

Now this is obviously very difficult to predict. What would you suggest for this?

I'm just trying to do a basic calculation of if I place £600 a month into a SI PP and £400 a month into an ISA for 30 years what this would roughly be worth on retirement.

Taking into account what Linton said above, I'd use a 5% growth rate. If you expect inflation to be around 3%, it's inflation plus 2%.

Jaguar_Skills

Cheers guys.

DonM

I always go or 5%, 7% and 10% over that period (low, medium & high)
£400 over 30 years gives £334,500 £485,000 & £868,500
all rounded down to nearest £500.
£600pm would give 50% extra obviously

I exclude tax implications for the obvious reason as we don't know what the tax rates will be over the next 30 years on your pension contributions or eventual withdrawals. Typically a pension will give you a higher return due to tax breaks but will come with more conditions (ie no access before 55 etc)