Standard Life Pension Calculator

squeeks

Hi,

Can anyone help me with the standard life pension calculator. To me it seems overtly pessimistic, especially if you try to retire early.

For instance if I use the following fantasy values:

Current age: 18
Income: £35k
Select the 50% lifestyle goal (£35,922 Income target)
Pension contributions: 20% total
Existing Pension fund: £1,000,000
Retirement Age: 55

It works out the pension return would be £28,773 giving a £7,149 yearly shortfall from the income target. So someone with 33 years of contributions at 20% and a million pound starting pot is still going to be underfunded.

Is it not adding any compounding growth on the existing pension fund? Or are growth rates really that low?

dunstonh

Or is it that you are missing something in the assumptions being used?

look at the assumptions for:
1 - inflation (figures are likely to be converted to todays terms not future money terms.
2 - how the income is drawn (what type of annuity - is it appropriate or did you select drawdown - if so, what drawdown rate)
3 - investment growth rate (is it appropriate for your asset mix)

AnotherJoe

These things aren’t calculators heck they aren’t even guessers. They just run some simple calculations that bear little relevance to anything.

They have no idea what numbers your investments will return but If you feed some low ball numbers in you’ll get low ball numbers out.

That’s what they do because years ago they used bigger numbers which were very optimistic, now they’ve veered the other way to stupidly pessimistic . All “calculators” use the same government approved figures so plans are comparable, however now they are also meaningless.

Doing it yourself in a simple spreadsheet will yield more likely / realistic results.

squeeks

I had run some number locally, and it just doesn't fit anywhere close to this calculator, so I assumed I'd miscalculated.

I thought I would try an extreme case and still it comes out quite low, so thought I would ask others.

cobson

If you have chosen a 50% lifestyle then shouldn’t it be aiming for an income of £17500 in today’s terms, not £35k ?

tony4147

I've just run my figures through 3 calculators and the results vary widely.
SL £6986 no TFLS
HL 11,000 after TFLS
Money advice service £12,191 after TFLS

And because of the above I trust my own spreadsheet more. They all appear to be based on annuities, the SL figures will increase whereas the money advice service figures will have no increase and as for the HL figures I don't know if they escalate or not.

JoeCrystal

tony4147 wrote: »

I've just run my figures through 3 calculators and the results vary widely.
SL £6986 no TFLS
HL 11,000 after TFLS
Money advice service £12,191 after TFLS

And because of the above I trust my own spreadsheet more. They all appear to be based on annuities, the SL figures will increase whereas the money advice service figures will have no increase and as for the HL figures I don't know if they escalate or not.

If you mean pension itself get escalated on HL calculator then it is level with advanced assumption can be adjusted to up to 3% or 5% per year (I generally use HL calculator for the working out for this forum (apart from making myself miserable with dire outcome for my own provision)). This raise an interesting question, which pension calculator out there are the better ones? I do wish that they stop assume that we want to take full 25% tax free lump sum, is that option really that widely taken?

tony4147

JoeCrystal wrote: »

If you mean pension itself get escalated on HL calculator then it is level with advanced assumption can be adjusted to up to 3% or 5% per year (I generally use HL calculator for the working out for this forum (apart from making myself miserable with dire outcome for my own provision)). This raise an interesting question, which pension calculator out there are the better ones? I do wish that they stop assume that we want to take full 25% tax free lump sum, is that option really that widely taken?

Yep missed that.
So I have a fund of £245k and will pay in another £90k over the next 5 years giving me a fund of £335k without any growth or decline. A level annuity at 60 with no escalation is £4,680, therefore if it were today and I went the annuity route then I would be looking at approx £15,678 without a TFLS or £11,747 with a max TFLS. This would suggest that the money advice service calculator is the nearest and the SL calculator as far to pessimistic.

I won't be going the 100% annuity route, maybe a mix of annuity and DD, and I believe from this forum that most people generally do take the TFLS.

dunstonh

and I believe from this forum that most people generally do take the TFLS.

Not any more. Phased flexi access drawdown is popular.

With an annuity, taking the 25% as an upfront lump sum was sensible. With drawdown its not unless you actually have a need for a lump sum or you are doing it for tax purposes (such as a benefit crystallisation event to avoid a lifetime allowance charge)