Projected plan value

sonny_c

Hello everyone,

My Financial Adviser indicated my projected plan value to be between Mid-High investment growth rate but I've just used the online Pension calculator here and it's more like between Low-Mid which would leave me with a major shortfall.

I'm totally confused, are these two different things

Retirement date: 2041

Any help would be appreciated
Thanks

Linton

Projected plan values are extremely rough and ready using different estimated growth rates. Dont rely on them, they are for illustrative purposes only. Also, they may be given in £ terms ignoring inflation or use current value with an assumed rate of inflation. If you provide more details people can comment in greater detail.

dunstonh

All projections use different assumptions.

The IFA projection may use stochastic modelling. It may use a crude averaged rate or it may use the FCA default.

The MAS projections are not stochastic and take no notice of your underlying assets. So, whether you hold cash, low risk, medium risk or high risk investments, it will use the same rates for low/med/high.

All calculators use different assumptions. You would hope the adviser one would be closer to your personal scenario than a generic one. However, one thing you do know is that projections are unreliable and you are statistically unlikely to get anything close to the value projected. The further you are away, the wider the gap above and below it could be.

AnotherJoe

As a matter of interest, what is your salary, age and how much are you saving including employer contribution?

sonny_c

I'm 40 years old and contributing £19.73 a month and my employer is contributing £24.66 a month. There's currently £12K in the pot

Salary sacrifice DC pension, earning £29k a year and would really like to retire on £19k at 65 years (SEP 2043).

Contribution structure for plan
Up to SEP 2017 my contribution 1.62% employer contribution 2.04%
OCT 2017 - SEP 2018 my contribution 3% employer contribution 2.04%
OCT 2018 onwards my contribution 5% employer contribution 3%

dunstonh

I'm 40 years old and contributing £19.73 a month and my employer is contributing £24.66 a month. There's currently £12K in the pot

That is a very low contribution. You wouldnt want someone in their low 20s paying that small an amount.

would really like to retire on £19k at 65 years (SEP 2043).

Unless you have other pensions or investments, that is not going to happen. I guess this is why you are seeing an adviser?

sonny_c

dunstonh wrote: »

That is a very low contribution. You wouldnt want someone in their low 20s paying that small an amount.

Unfortunately I'm finding that out now

dunstonh wrote: »

Unless you have other pensions or investments, that is not going to happen. I guess this is why you are seeing an adviser?

No other pensions or investments, the adviser has been arranged via my employer and discussed with my projected plan value + state pension it was indicated approx. £16K to retire on.

While using the Pension calculator £19K was based on people on the same salary range as me say they would like to have around 67% of their current salary in retirement. I really should draw a retirement budget

Thrugelmir

sonny_c wrote: »

While using the Pension calculator £19K was based on people on the same salary range as me say they would like to have around 67% of their current salary in retirement. I really should draw a retirement budget

Also consider upping your monthly contributions. Who knows what the future may hold for investment returns. What you save will influence the amount of pension you ultimately draw.

davieg11

sonny_c wrote: »

I'm 40 years old and contributing £19.73 a month and my employer is contributing £24.66 a month. There's currently £12K in the pot

Salary sacrifice DC pension, earning £29k a year and would really like to retire on £19k at 65 years (SEP 2043).

Contribution structure for plan
Up to SEP 2017 my contribution 1.62% employer contribution 2.04%
OCT 2017 - SEP 2018 my contribution 3% employer contribution 2.04%
OCT 2018 onwards my contribution 5% employer contribution 3%

I would increase my contributions immediately. I earn less than you, I am 43 and 17% goes into my pension. As they say on here, put in peanuts and get peanuts back. When you increase your contributions, after a couple of months you don't miss it from your wage.

AnotherJoe

Think about it logically. You are saving less than £50 a month. That is nowhere near enough to be paying out £1600 a month even after 20 years of growth You'd need it to grow more than 30x.

Currently you are saving less than 2% of your salary. Rule of thumb is, save half your age as a percentage from the time you start, keeping that percentage steady at the starting value. E.g. Start at 20, always save 10% of your salary, start at 30 save 15% going forward , and so on. You are effectively starting at 40 since you have so little put by, so you'd be looking at 20% which is 10x what you save now. Somewhat of a shock to the system I guess ?

Seems you've fallen into the trap of thinking it was enough to have a pension, rather than you needed also to save enough. So, first step is, save more. Second step spend less which helps with first step. Third step earn more. Every one of those will help and the earlier you start the better.

sonny_c

Sorry folks slight error....which doesn't make a huge difference
Monthly contributing [STRIKE]£19.73[/STRIKE] £31.96 (1.62%) and my employer is contributing [STRIKE]£24.66[/STRIKE] £50.31 (2.04%) and Tax relief £7.99 Total contribution 3.66% Total monthly contribution: £90.26 Total annual contribution: £1,083.07

AnotherJoe wrote: »

Currently you are saving less than 2% of your salary. Rule of thumb is, save half your age as a percentage from the time you start.

Crunching numbers for me to save 20% of my salary
My contribution £335.38 (17%) employer contribution £73.98 (3%) and Tax relief £83.84 Total monthly contribution: £493.20 Total annual contribution: £5,918.40

I'm due to be mortgage free in MID 2019 (luckily) so this should be easily achievable, but I will see what if any further saving's can be made now.. already on the bread line.

AnotherJoe wrote: »

Somewhat of a shock to the system I guess ?

This is a major shock to the system and I'm very upset I thought my best interest were in hand but obviously not, I've seriously fallen into the trap and not impressed with the adviser!

I've learnt a valuable lesson this weekend