Naive question regarding contributions....

bob_dob

Hi,
Thank you for all the help.

I checked today with my pension provider (Scottish Life, now Royal London) and eventually they said that they can take additional contributions.

On another matter, I have just played around with The Money Advice Service pension calculator to try to explain something to a friend of mine at work and I put in my 'yearly pay before tax' (Gross) and chose that I contribute 5% and my employer 3% and it says my 'Pay on which my contributions are based' is £14,689 and gives my contribution as £48.96 plus £12.24 tax relief.

Please can I ask why this calculates it differently to what I actually contribute?

jem16

bob_dob wrote: »

Please can I ask why this calculates it differently to what I actually contribute?

Apparently that calculator works out what you would pay under the automatic enrolment rules - that doesn't apply to your pension.

This is the part of your annual pay that will be used to calculate your pension contribution under automatic enrolment. It is your earnings before tax (up to a maximum limit of £41,865 per year) – less the lower earnings threshold of £5,772.

if you click the button that says "Calculate on Full Pay" it will show you your contributions correctly.

bob_dob

jem16, is there anything you don't know?
Thank you.

jem16

bob_dob wrote: »

jem16, is there anything you don't know?

Lots and lots believe me. I don't think I could handle welding!

Thank you.

You're welcome.

bob_dob

Basically, the problem I'm having is my friend is 53 and has a final salary pension from his last employer which looks like being very successful but I am trying to make him see that joining our company pension, if only for 10 years, is definitely worth it being as our employer is matching our contributions up to 3%.

His negative way of 'working this out' included 1% contributions and didn't even include growth so I am looking to find some sort of calculator that would show, even at 1% contributions, that he would benefit more than the alternative...which is doing nothing.
I'm not sure if there is any such calculator that exists.

jem16

bob_dob wrote: »

Basically, the problem I'm having is my friend is 53 and has a final salary pension from his last employer which looks like being very successful but I am trying to make him see that joining our company pension, if only for 10 years, is definitely worth it being as our employer is matching our contributions up to 3%.

Absolutely definitely - never turn down free money. Would he take a 3% pay cut?

His negative way of 'working this out' included 1% contributions and didn't even include growth so I am looking to find some sort of calculator that would show, even at 1% contributions, that he would benefit more than the alternative...which is doing nothing.
I'm not sure if there is any such calculator that exists.

Try this one - you can vary the various bits and pieces to show different scenarios.

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

bob_dob

That's a great one. Not sure if it includes projected/potential growth or not but I suppose that doesn't matter.

jem16

bob_dob wrote: »

That's a great one. Not sure if it includes projected/potential growth or not but I suppose that doesn't matter.

The default growth rate is 5% but you can change that to 2% or 8% if you click on Advanced options once you get past the initial stuff.

bob_dob

Absolutely fantastic!!!

Thank you so very, very much!!

bob_dob

Mystic Bob Dob predicts that he will look at the 10 year prediction (2% growth) of a 5% contribution and employer 3% contribution that gives a projected pension value of £12,300 and say "If I just put that £85.25 in an interest paying account I'll get £10,230".

We will see.....