Pension planning programme?

borntobemild

Hi - I'm looking for a programme or calculation to help with pension planning.


What I want is something where I can put in size of pension pot, retirement age, number of years I want pension pot to last and assumed interest and annual increase figures, and it will tell me how much income I can take each year. Hope that makes sense.

mgdavid

borntobemild wrote: »

Hi - I'm looking for a programme or calculation to help with pension planning.


What I want is something where I can put in size of pension pot, retirement age, number of years I want pension pot to last and assumed interest and annual increase figures, and it will tell me how much income I can take each year. Hope that makes sense.

do you mean an Annuity calculator, or a drawdown calculator?

borntobemild

It's my own savings and not wanting to buy an annuity - maybe a drawdown calculator? Not really up to speed with the right terms.

mgdavid

you can make the assumption that annual interest/increase will just keep up with inflation (so cancelling each other out). Just divide the 'pot' by the number of years you will be taking it and the answer is the annual income.
This is crude however;
1. savings currently do not keep up with inflation, you need the pot to be invested to do that. If well invested you may beat inflation.
2. if the annual income is the same each year, its buying power will be progressively less and less due to inflation
3. what will you live on during the years between the pot running out and your demise?
Do you have other pensions?

borntobemild

I was assuming inflation higher than savings, so not a simple division by the number of years. I'm talking maybe £45,000 so not a lot, and I'm not confident enough to go for investing rather than saving.


When it runs out I'll have the state pension plus £100 or so monthly from another pension, and hopefully a house to sell and downsize.

atush

Well if you aren't confident in investing (for even a part) you Can be confident that the money will lose ground to inflation, and probably suffer shortfall risk too (ie wont last long enough).

If you haven't retired (as pension.retirement planning is meant to be done before) then save more into pensions between now and when you retire. Even at basic rate tax you will at least boost your investment by BRT.

borntobemild

I'm aware of both of those atush, that's why I'm looking for some sort of calculator including inflation so as to decide how much I can afford to take annually.

borntobemild

So if I retire at 65 and want my £45k to last 20 years, assuming interest rates and inflation at 3%, how much income could I take annually and not run out before I'm 85?


But would also like to know the calculation so I can play around with different time periods, inflation rates etc.

greenglide

So is firecalc what you want?

https://www.firecalc.com

It is US oriented but still works.

borntobemild

Thanks greenglide, but that looks like I have to say how much income I want each year - I want something that calculates for me how much I can afford each year if I want my lump sum to last for x number of years.

jamesd

borntobemild wrote: »

What I want is something where I can put in size of pension pot, retirement age, number of years I want pension pot to last and assumed interest and annual increase figures, and it will tell me how much income I can take each year. Hope that makes sense.

Use a regular savings calculator. For interest rate use zero because the calculator can't handle investment growth. Any interest rate entered is an annual loss of investment value and it can't take negative values to give growth.

[STRIKE]For interest rate use the annual increase in investment value, after inflation. Say 3 or 4% depending on investment mix. Adjust monthly savings amount until the final answer is your pension pot size and you'll get the possible monthly income for the term you enter.

Example, 250,000 pot, 4% growth, 30 years. First guess at monthly income £500. Your investment will be worth £347,024 so the income is too high for the pot. Next guess is 250 / 347 ( 500 = 360 and that's the correct answer. You're really only using the calculator to check the first guess, then the next guess calculation will give you the answer every time. You can't use negative interest rates to cover cases where growth is lower than inflation.[/STRIKE]

Firecalc has options to tell you the safe income levels for a given pot size. You'd also need to change the investment growth assumptions there if you're not going to invest.

[STRIKE]Because you used after-inflation investment growth all numbers are in today's money including inflation-linked increases in your income.[/STRIKE]