Pension predictions

harry33

Hi, i currently pay £85 pm and my employer pays £170 per month in to my pension. I have just increased it by £50 pm which was half my pay rise. If i increase this amount by £50 pm for the next 5 years any ideas on what my pension would be worth upon retirement of 60? Or the most accurate site for making pension predictions.

Im 35 with a pot of £35000 currently in high risk

Been on a few sites but they vary by over a hundred thousand.

Thanks with any help

PensionTech

This is not a question that can be answered with such little information. Even with all the information you could possibly provide, it would still be something of a crystal ball job.

To give an idea of what would be needed by anyone estimating figures:

Firstly, do you mean increasing it by £50 every month for the next five years? Or do you mean paying £50 more than you currently are for the next five years? The former would see your pension contribution rising to over £3000pm by the end of those five years, which would start to create tax problems; the latter would see your contribution rising to £220pm immediately and staying fixed for five years. Or you might mean something different entirely.

Secondly, what happens after the five years? Would the contributions drop back down? Would they stay level? Would they stop altogether?

Thirdly, what assumptions (if any) are you making about your salary increases? Are your pension contributions determined as a percentage of your salary and will therefore rise as your salary does? If not, will your contributions increase for any other reason between now and age 60?

Fourthly, is the current contribution based on the auto-enrolment minimum? Will it go up as the auto-enrolment minimum increases?

Fifthly, what method of tax relief is applied on the pension? Do the contributions you've mentioned include tax relief or not?

Sixthly, what are the charges for managing and investing your pension?

Seventhly, when you say "high risk", do you have any indication (e.g. from former pension statements) of the expected rates of return?

Eighthly, will your investment strategy change? If so, when and to what?

That's just dealing with what your pension pot might grow to by age 60. If you want to know what you might be able to get out of it, you'd also need to take into account:

Ninthly (I'm starting to think these are no longer words), in what form do you intend to take your benefits? Lump sum, annuity, drawdown, or any combination of the three?

Tenthly, to figure out your life expectancy: are you male or female? Good health and fitness? Any serious hereditary life-limiting illnesses in the family? Where in the country do you live? What's your occupation?

I ask these questions not so that you can give me the answers and I can run a calculation, but so that you can see what kind of things you have to take into account in order to project a figure. My best suggestion to you is to create a spreadsheet that accumulates your expected contributions, investment returns and charges month-on-month (or year-on-year) until age 60, and then do some research into annuity calculators and drawdown rates if you want to see how that converts into a retirement income. I think jamesd has previously given links to certain calculators (if he happens upon this thread), but there probably isn't any one "best" calculator.

edinburgher

While the majority of your post is very helpful, #1 is ludicrous, OP clearly means an additional £50/m added over each of the 5 years (so each year they would be paying £600 more than the year before, ignoring pay increases etc.)

Someone who pays £135/m will not be paying £3000/m 5 years later.

harry33

Thanks for the reply. I wish i could afford the £50 increase each month but it would be £50 pm increasing to £100 the following year per month upto £300. After this i may keep increasing but this was a 5 year plan to boost my pot til im 40 then re -evaluate. My company pays all managment costs. My company pays 6% max to my 3%. Not sure about the tax bit but think the money comes out beforw tax so thats my saving. I see what you mean about all the questions...alot more complicated than i thoughy hence the vast differences in online predictions

edinburgher

My company pays 6% max to my 3%. Not sure about the tax bit but think the money comes out beforw tax so thats my saving.

Also worth seeing if your payments to the pension are made via salary sacrifice (saving on NI payments as well).

harry33

Ill check the NI saving at work tomorrow ta

PensionTech

While the majority of your post is very helpful, #1 is ludicrous, OP clearly means an additional £50/m added over each of the 5 years (so each year they would be paying £600 more than the year before, ignoring pay increases etc.)

Someone who pays £135/m will not be paying £3000/m 5 years later.

Quite - which is why I asked the question, to demonstrate that it wasn't clear what was meant, and indeed it turned out to be the third option of "something different entirely". I have however noticed that I got the employer and employee contributions the wrong way around in my illustration...

edinburgher

PensionTech wrote: »

Quite - which is why I asked the question, to demonstrate that it wasn't clear what was meant, and indeed it turned out to be the third option of "something different entirely". I have however noticed that I got the employer and employee contributions the wrong way around in my illustration...

But it's not a third option, it's what I (and anyone not being pedantic) would have assumed!

AnotherJoe

edinburgher wrote: »

But it's not a third option, it's what I (and anyone not being pedantic) would have assumed!

I didn't expect it to be that third option either. Though I am quite pedantic

But I genuinely didnt think it meant that, thiugh it makes sense, i thought it mean £50pm extra compared to now, for the next 5 years.

LXdaddy

harry33 wrote: »

If i increase this amount by £50 pm for the next 5 years

Increase by £50 per month for the next 5 years does literally mean increasing by £50 each month for the next 60 months.

But that's not very sensible so I assumed that what was meant was "increase by £50 per month each year for the next 5 years". But that's an assumption.

PensionTech's point was that it's not possible to answer the OP's question without considerably more information and clarity. And I assumed that PensionTech's was suggesting that OP needs to do put some more thought into what contributions would be made before trying to calculate the size of the pot he could build.

d70cw6

over 9000 imo