Pensions calculator

Jaguar_Skills

Hi all.

When plugging figures into a pensions calculator do these factor in the top ups that the government will pay?

I.e I will be a HR Tax Payer when I finish travelling.
I will be putting £600 a month into a sipp when I come back.

Do the calculators take into con side ration that this will actually be £1,000 a month rather than £600?

Are there any good calculators anyone could point me in the direction of?

I just want to know how much I'd have when I'm 60 (30 year payment term)

mania112

The calculator would normally know to include tax relief (or it might just ask for the gross figure, so you can enter £1000).

Being a high-rate taxpayer is of no significance to the calculator. Additional tax relief you would claim personally, it won't enter the pension.

Here's a fairly sophisticated free one: https://www.hl.co.uk/pensions/interactive-calculators/pension-calculator/pension-calculator

An adviser could go into a lot more detail about how to plan for retirement and help you reach your goals, find a local one here: https://www.unbiased.co.uk

Your_Hero

Jaguar_Skills wrote: »

Are there any good calculators anyone could point me in the direction of?

I just want to know how much I'd have when I'm 60 (30 year payment term)

https://www.hl.co.uk/pensions/interactive-calculators/pension-calculator

Always read the assumptions used on the calculator.

Do the calculators take into con side ration that this will actually be £1,000 a month rather than £600?

It's not £1000. If you put in £600 it's get basic tax relief (20%) so it's £750 gross. You then have to reclaim 20% of £750 from HMRC.

jamesd

Calculators normally just expect you to enter the gross amount after allowing for all tax relief and employer parts. The HL one is a bit unusual in that, it adds the tax relief to your contributions but not to the employer contributions, correctly. However it sometimes gives odd results when you change values so use some care with it.

The FCA sets assumptions that calculators are required to use. Those aren't particularly good for long term planning, particularly drawdown. A couple of highlights:

1. Income is assumed to come from an inflation-linked annuity with spousal pension option, something only a small minority of people really buy. Something like 90% of all annuities sold are level annuities and most of those are single life. You'll probably do better to ignore the income projection and just use 4% of the pot size if you're planning to use drawdown.

2. The investment returns are for an assumed balanced managed fun mixture and loaded to be appropriate for a 10-15 year time range from when the estimates were planned. The current ones also assume a drop in investment returns, in part because of high prices for government and corporate bonds that will be irrelevant for anyone not having a strong weighting to them.

Personally I prefer regular savings calculators and putting in my own assumption for after inflation investment growth. When writing here I usually use the long term UK market return of 5% plus inflation, then write about using generous safety margins.

In general I prefer Firecalc to just about all standard pension calculators. That's in large part because it has substantial coverage of investment risk and makes that central to the planning process so it can't be ignored.

dunstonh

The FCA sets assumptions that calculators are required to use.

Although not on shortfall calculators on websites or adviser software. Just on pension statements.

jamesd

Thanks. Most or maybe all I've seen do seem to use those FCA assumptions in calculators. I'm glad that it is not strictly mandatory.

puk999

mania112 wrote: »

Being a high-rate taxpayer is of no significance to the calculator. Additional tax relief you would claim personally, it won't enter the pension.

This just got my brain churning. When you claim the additional tax relief from HMRC, they're not going to send you a cheque are they? If they did, you could then pay this into your pension and claim additional tax relief on this also. So will HMRC always adjust your tax code?

CLAPTON

puk999 wrote: »

This just got my brain churning. When you claim the additional tax relief from HMRC, they're not going to send you a cheque are they? If they did, you could then pay this into your pension and claim additional tax relief on this also. So will HMRC always adjust your tax code?

best to choose what how much money you want to put into your pension and do the maths as follows


if you want 1000 to end up in your pension then actually pay in


1000*.8 = £800 : the pension provider will then claim 200 from HMRC so your pension gets 800 + 200


you then claim the other 200 from HMRC
so the 1000 in your pension has cost you 800 - 200 = 600
there will be some lags getting the money off HMRC

puk999

I was aware that the pension provider claims basic rate tax back and you claim the rest from HMRC.

The bit I found interesting was that the part (re)claimed from HMRC doesn't enter your pension so could you theoretically get > 40% tax relief by putting it into your pension and it then attracting additional tax relief?

kangoora

I'll second firecalc as a pensions calculator. It allows you to put in what YOU think you will need as income and not some arbitrary figure based on a percentage of your income.

https://www.firecalc.com

It also allows you to do several 'what-ifs', like if you expect to down-size your home at age 70 it allows you to add a lump sum to your pension pot at that age. It supports various pensions starting a separate ages (up to 3 I believe) and, if you want to get into it that deeply, put in different assumptions on investment growth, inflation, expenditure curves etc.

Finally it runs your assumptions through over 100 years of stock market 'real' returns, including the Great Depression, World Wars etc and plots graphs and gives a percentage chance of you exhausting your pension pot.

Only thing against it, is it is US based and US stock market data but I've not seen any pension calculator anywhere in UK that comes remotely close to being able to add a decent set of variables to your pension planning.

Hopefully no-one will come along now and say it's rubbish

CLAPTON

puk999 wrote: »

I was aware that the pension provider claims basic rate tax back and you claim the rest from HMRC.

The bit I found interesting was that the part (re)claimed from HMRC doesn't enter your pension so could you theoretically get > 40% tax relief by putting it into your pension and it then attracting additional tax relief?

the more you put into your pension the more tax relief you have (at 40% up the amount over the 40% limit)


it doesn't make any difference if you put it in two lots or one :


in my example above I suggested you put in 800 actual money that is uplifted to 1000 and with HMRC giving to back 200 at an actual cost to you of 600


if you then put the 200 into your pension then this will be uplifted to
200/.8 = 250 and you get back 50 from HMRC
so you now have 1250 in your pension for a total cost of 800 -200 + 200 -50 ie. 750


this is exactly the same result as if you put 1000 in the first place
i.e. your pension would have 1000/.8 = 1250
and you get back 250
so it actually costs you 1000-250 = 750