Is my pension on track?

NorthernMonkey1

Hello all,


I'm trying to work out if my pension is on track for where I would like to be.


I would like to retire as early as possible (who doesn't) with an income of around £25,000. I'm currently aiming for 63.


If I'm 35 now, would a current pension pot value of £90,000, would that put me on track, or behind where I need to be in order to achieve this, assuming that I have been working so far since I was 20.


That means I am 15/43rds through the number of years I have to save?

ExMugPunter

Somebody better with figures than me will be around in a minute.

But in the meantime have a play with this (if you haven't already!)

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

Triumph13

You've not given us a lot to work on! The big question is how much you are putting in and how it's invested.
If I make some fairly huge assumptions that you have been contributing the same amount, inflation adjusted, for the last 15 years and will do so for the next 28 years and that you have received / will receive an average real return of 4% then that would suggest you are contributing about £4,400 a year. On those same assumptions the predicted pot at 63 is about half a million.
If state pension is £8k then you need another £17k to get your £25k pre-tax. With the oft-quoted 4% drawdown rate that would just leave enough over to plug the gap before state pension kicked in at 68 or 69.
So on those assumptions, yes you are roughly on track, but without a great deal of slack.

NorthernMonkey1

Thank you,


I'm currently paying in more than £4.5kpa, however, things are going quite well at the moment, however, it's probably not a good assumption to say that they'll stay that way forever.


I was wondering if the pot size looks about right for where I should be in my saving for retirement.


Thanks NM

Paul_Herring

NorthernMonkey1 wrote: »

I'm currently paying in more than £4.5kpa

A brief play with the calculator in the second post indicates that to reach (today's equivalent of) £23k on your contributions alone, you need to be contributing £12kpa now, increasing with inflation each year.

Data entered:

DOB: 13 Mar 1980
Gross Salary: £45k
Existing fund: £90K
Retirement age: 63
TFC: 0%
Personal contribution: £1000
Employer: £0

Results:
Estimated fund value: £495K
Estimated income: £23,200.

jamesd

I suggest that you try the Invidion pension calculator because it has better flexibility when there's an existing pot and for growth and inflation options.

I set the current rate of inflation to 3% for long term planning and fund growth to 8% to match the 5% plus inflation long term growth of the UK market. I set the annual management charge to 0.5% for tracker funds and some platform cost. I set a target income of £18,000 to match your £25,000 less £8,000 of state pension. I used the drawdown income rate of 4%, a commonly used guideline. I set proposed monthly contribution to 365 gross increasing with RPI. I entered your existing £90,000 pot size.

The result was that you could expect an income of around £19,271 so you are on track for 63.

This doesn't allow for the 50-100% safety margin that I'd like in such planning but you seem to be doing pretty well at the moment.

It's worth knowing that compounding of growth means that high contributions early on are worth more than later so it's a good move if affordable to pay in more early on rather than later.

AlanP_2

NorthernMonkey1 wrote: »

I would like to retire as early as possible (who doesn't) with an income of around £25,000.

Quite a few people I would think who are in a job they really like and get a great deal of satisfaction from.

I'm with you BTW - Cash in as soon as you can.