Laymans terms please

the_gardener

I have a pension with aegon that has a pot of about 85,000 at the moment and went up last year at about 9%.
The problem comes when I am looking at the estimate as to what my pension will be worth when I retire.
low estimate 109,000
mid range 191,000
high 332,000
the mid rate they use is 1.70 the high and low rates are 3% above and below the mid rate.
this bit confuses me though? If the growth rate we've used is the same as the rate of inflation, this reduces the effective growth rate to 0%


Anyone help me as to what my rate is actually running at because I have not a got a clue.thanks.

greenglide

These are just standard projections based solely on fairly growth rates.

No one can really forecast how well investments will do. All they do is say that "if investments goes up by 5% it will grow by 5%".

Are you happy with the choice of funds? This is the key.

AlanP_2

Looking at the similar projection I have from Standard Life they take 2.5% off each of the low - mid - high projections to allow for inflation which they say is in line with FCA rules.

Is there any reference in the notes to an inflation allowance / adjustment on yours?

jamesd

I suggest that you use the high value. It's more likely to be right and might well be 8% less 2.5% inflation less maybe 1% for charges. Since the UK stock market long term return has been about 5% after inflation, that high projection is about right for historic growth. However, they might also have used different inflation rates depending on the growth rate used.

Personally I prefer to use a regular savings calculator. At least then I know what numbers are involved instead of wondering what fiddle factors are involved.

the_gardener

I have all my money in one fundas the IFA who comes in on behalf of the company recommended.This is the fund.
Scottish Equitable BlackRock Aquila 40/60 Global Equity Index Lifestyle fund.
It seems to be doing okay?

jamesd

That's a passive index tracker fund with a 40% UK, 60% global split. As you get within some years of retiring money will be moved out of this fund into low growth investments in case you buy an annuity.

The fund itself is a good base choice for a person who isn't very familiar with investing, though you do need to be prepared for value drops of 20% or so two or three times every ten years and 40% once or twice. The ups between those more than make up for the drops, like a rollercoaster in reverse. I think that the IFA made a sensible recommendation that is likely to serve you well for increasing your pension value. To do better you'd need to pay much more attention to investment choice and learning about investing.

the_gardener

Thanks for that. I was looking at gilt funds but I see they might hit the wall sometime soon.All the numbers confuse me and I hate it when my fund loses a £100 let alone thousands.Some of the Emerging company funds look interesting.

mania112

Best bet is to have a mix of all the different funds -- over time this will reap better results because some years, one sector is better than the next.

sandsy

The rate of 1.7% is after inflation of 2.5% so the total mid-rate is 4.2%.


(The sentence you refer to is saying if the total midrate was 2.5%, then knocking off the inflation would make it zero.)


It's done that way so you can compare the annuity income shown with your income now without having to worry about what inflation might be in the meantime (as it's already taken into account).

the_gardener

Thanks Sandsy, that has answered my question I think.No wonder I am only a gardener.So if my total value has gone up about 8-9 % this year am I looking at the higher vale as to what I am likely to get at 65 if it carries on performing at the same rate.