How much will savings be worth in 14 years time?

Conrad

Trying to work out how much will likely accumulate 14 years from now from the following sources, assuming typical investment returns?
The confusion is in trying to make a rough and ready reckoner as to what the total value will be.

Past illustrations from Framlington showed £50 per month invested for 17 years from 1980 produced 100x the amount invested (clearly they chose an exceptional returns period for that fund so I dont expect even a 20th of that performance), but what is a reasonable assumption -2 x the sums invested? 3 x ?

Secondly what does that lump sum equate to in today money terms allowing for inflation?


Stocks n shares ISAs (and frozen PEPs) worth £45000 today, adding £500 per month.

Unit Trust worth £5000 today, adding £150 p m

Frozen Pru pension with £15000 current value. No further contributions.

Live pension with £9000 now, and adding £90 pm (+ Tax contribution)

I realise everything depends on performance but there must be typical return which is a yardstick to consider.

Rafter

Conrad,

As you say, very difficult to predict because it depends on performance over time.

If we work on the following......

CPI inflation of 3%

Bank of England base rate 5%

Return on Investments 6% before tax and after management fees etc (usually what is used by 'central' projections in pension illustrations.

Tax rate 40% now (I'm assuming you are a higher rate tax payer from your investments)

Your ISA would appear to be worth £232k

Unit trusts £41k

Pru pension £34k

Live pension £59k

Total value £366k which would buy you a pension of around £26k a year at a 7% annuity rate (this will depend on your age, sex, whether you smoke and whether you want spouse cover, a pension that rises with inflation etc etc etc).

In todays money, discounting this back at 3% your fund is worth £235k in todays month which would buy a pension of £16k per year.

Personally I'd suspend adding to your unit trust and max out your pension contributions to benefit from the tax treatment.

R.

Rafter

Oh, and if you private message me with your e-mail address I'll send you my ready reckoner.

R.

Jake'sGran

In the early 80s I started to save £60 month with Fidelity in their SS fund. I was a complete novice but was impressed with their performance table in the Sunday Times. I had to stop the payments as my husband was made redundant. The total paid in was about £4200 but was over £50k in the 90s.
There are too many variables to be able to assess how much you will have accumulated in 10-14 years but you must know that in the long term you will have gained by investing in the stock market. I don't believe anyone could calculate what your total is going to be.

EdInvestor

Rafter wrote: »

Personally I'd suspend adding to your unit trust and max out your pension contributions to benefit from the tax treatment.

R.

Don't forget pensions are taxed in retirement so most of the tax relief is clawed back.

Hungerdunger

Just a cautionary note. I have absolutely no idea whether this could happen here - perhaps someone else could tell us this.

During the 1980s the Nikkei rose steadily and at one point stood at over 40,000. Then in 1989 there was a crash, and today, while it has recovered from its lowest point, it stands at just 15,480

thor

The assumption that stock markets rise over the long term has a problem in that you don't know how long 'long term' is. Sure stocks are higher now than they were 100 years ago but there is no fundamental reason why they will be higher 100 or 100 years from now.
The ftse is below it's level 8 years ago while the Nikkei has been performing badly for nearly 2 decades. Investing in stocks and shares is a gambling without the social stigma attached to visiting the bookies or getting hooked on slot machines.

musehead

thor wrote: »

Investing in stocks and shares is a gambling without the social stigma attached to visiting the bookies or getting hooked on slot machines.

Exactly, this is what i've just been saying in the £12k -> £60k thread.

Somehow an astute investor in S&S is seen as much more classy and intelligent than a professional gambler, but in reality they do exactly the same thing but through different mediums. I suspect proportionally there are just as many people who lose their fortune on the stock market as lose their fortune at the bookies.

cheerfulcat

musehead wrote: »

Somehow an astute investor in S&S is seen as much more classy and intelligent than a professional gambler, but in reality they do exactly the same thing but through different mediums. I suspect proportionally there are just as many people who lose their fortune on the stock market as lose their fortune at the bookies.

I'm sorry, but this is nonsense. Buying shares in, say, a big blue chip company or a global investment trust ( or units/shares in a unit/investment trust which invests in same ) is not the same as betting on horses or football matches. Investors own part of a business and receive a part of any profits, whether through dividends or share price appreciation - or both - over the long term. Any money made by regular gamblers depends on getting lucky in a series of discrete, usually short term, events.

BTW, the proponents of matched betting ( which is what you introduced in the other thread ) always stress that it is not gambling.

musehead

cheerfulcat wrote: »

BTW, the proponents of matched betting ( which is what you introduced in the other thread ) always stress that it is not gambling.

Yes, matched betting isn't gambling - I was refering more to a generic professional gambler here rather than a matched better.

I shouldn't have likened it to long term investing. While it may still be a gamble, the mechanisms are completely different. I was thinking more along the lines of day trading and short term investing strategies, such as the people who may have bought NR shares recently and sold them at a profit (or loss!) a few days later, or the people who study small movements in the indicies every day.

Hungerdunger

cheerfulcat wrote: »

I'm sorry, but this is nonsense. Buying shares in, say, a big blue chip company or a global investment trust ( or units/shares in a unit/investment trust which invests in same ) is not the same as betting on horses or football matches. Investors own part of a business and receive a part of any profits, whether through dividends or share price appreciation - or both - over the long term. Any money made by regular gamblers depends on getting lucky in a series of discrete, usually short term, events.

I'm sure the small shareholdes in Northern Rock will be interested to read this.