Pension calculation.

Brricktop69

Just looking for a little help if possible as i'm quite new to this, I have been looking at my pension on the L&G website and they have a pension planning page but it isn't making sense to me.

Basically 12 months ago I had a pension pot of £108k, since then I have paid in roughly £6.5k of contributions giving a total of £114.5k, however the actual pension pot now has a value of £126k and so there looks to have been some decent growth. I wanted to forecast where I would be in 10 years time and so used the forecast tool.
I have now upped by contributions to £7200 a year so in 10 years this would give me £72k of additional contributions, now given the current pot stands at £126k I was surprised to see the tool saying I could expect a total pension pot of just £202k. As such there appears to be no growth calculated into this forecast figure.

I know that no growth is guaranteed but over a 10 year period what do people feel a realistic growth figure would be?

Maybe I am not understanding how it all works but I am trying to learn.

I suppose what I am trying to understand is with a £126k existing pot and by paying in £600 a month (£7200 a year) what would be a reasonable total amount of the pot be worth in 10 years time.

Any help would be greatly appreciated.

dunstonh

Projection calculators use a range of assumptions.   You need to understand what these assumptions are.

A common misunderstanding is that most projections nowadays show it in SMPI basis.  That is where there is an annual deduction for inflation to show the figures in today's spending power rather than future money.

eskbanker

Brricktop69 said:

I know that no growth is guaranteed but over a 10 year period what do people feel a realistic growth figure would be?

Depends entirely on what the money is invested in, but probably somewhere between 0% and 6% average annual growth - planning and forecasting tools should allow you to model different risk levels.

Silvertabby

But do be wary of uprating your investment and then looking at the result in relation to today's cost of living.  

tacpot12

I'd expect your pot to be worth between £300K and £350K, depending on your average rate of return. (5% would give you about £300K).

I used Excel to calculated this. Excel allows you very quickly to calculate the growth on the month you already have invested, and add to this the further contributions you make in a year, and to then repeat this for 10 years. 

El_Torro

If you're looking for a pension calculator I like this one:

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

Make sure you tweak the Advanced Options. Personally I like to use an average growth rate of 5% per year, including fees.

Bear in mind that the HL pension calculator does take inflation into account, so shows you figures in today's values.

Brricktop69

tacpot12 said:

I'd expect your pot to be worth between £300K and £350K, depending on your average rate of return. (5% would give you about £300K).

I used Excel to calculated this. Excel allows you very quickly to calculate the growth on the month you already have invested, and add to this the further contributions you make in a year, and to then repeat this for 10 years. 

I did similar myself and got to figures between £320k to £350k, a huge difference to the £200k being forecast on the L&G tool

dunstonh

Brricktop69 said:

tacpot12 said:

I'd expect your pot to be worth between £300K and £350K, depending on your average rate of return. (5% would give you about £300K).

I used Excel to calculated this. Excel allows you very quickly to calculate the growth on the month you already have invested, and add to this the further contributions you make in a year, and to then repeat this for 10 years. 

I did similar myself and got to figures between £320k to £350k, a huge difference to the £200k being forecast on the L&G tool

L&G uses SMPI basis (todays terms).   

The differences are not huge.   The figures will be giving the same outcome but just displaying the outcome in a different way.