Naive question regarding contributions....

jem16

bob_dob wrote: »

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.....

You need to remind him that it won't be £85.25 - it will only be £68.20 after tax relief as that is what his net pay will be less by.

By the way using the HL calculator, I get £16,400 for pension and would get £9040 for interest at 2% in a savings account. What other assumptions were you using with what annual salary?

You would also be doing pretty badly to get growth only at 2% in a pension fund over 10 years. 5% is more the norm and would give a pot of £22,300.

bob_dob

jem16 wrote: »

You need to remind him that it won't be £85.25 - it will only be £68.20 after tax relief as that is what his net pay will be less by.

By the way using the HL calculator, I get £16,400 for pension and would get £9040 for interest at 2% in a savings account. What other assumptions were you using with what annual salary?

You would also be doing pretty badly to get growth only at 2% in a pension fund over 10 years. 5% is more the norm and would give a pot of £22,300.

Apologies jem16, using the following details:
D of B: 1/1/1961
Gross salary: £20,460
Existing pension fund: £0
Retirement age: 63 (I was just using the 10 year example)
Personal contribution: 5%
Employer contribution: 3%
Assumptions: 2% Growth and charges of 1.5%
I got this:
Estimated value of your pension: £12,300
Tax-free cash: £3,070


However, if I use 5% growth, I get:
Estimated value of your pension: £15,100
Tax-free cash: £3,780


At any rate, I was wrong (for now), he took the print outs home to look at them and hasn't said a thing about them since....!


I'll let you know!