People's pension question

trudy1980

Hi I have a work place pension with nest that I contribute into (just the minimum as the company will not pay more than 3%) I also have a  old work place pension with the peoples pension that I pay into monthly by dd (just me as I left my old job) I do this as like the idea of using two different companies and I get the management rebate monthly. My question is I have just seen the below on the peoples pension website

• Inflation – this is the rate at which prices for goods and services will increase over a period of time. Our projections assume a rate of 2.5% each year until your selected retirement date. We illustrate how inflation will reduce the buying power of your pension pot over time and so your projected value at retirement is in ‘real terms’ ie today’s prices (see below for more details).
• Future contributions received through your employer will increase each year by inflation (2.5%). However, any payments you send to us by personal Direct Debit will remain unchanged.
• The effect of the annual charge of £2.50 and the management charge at 0.5% a year (but not any

If I am reading it correctly my payments (by direct debit not employee) are not going to increase)

If this is right should I cancel my direct debit and pay the extra into nest?

Any advice would be great as I'm not that clued up on pensions thank you

dunstonh

If I am reading it correctly my payments (by direct debit not employee) are not going to increase)

No. They are saying their projections use the assumption that they are not going to crease.

If this is right should I cancel my direct debit and pay the extra into nest?

Projections are just synthetic calculations to show what you could get back if those assumptions turn out to be real (they wont do).    You can increase/decrease, stop or start or do what you like with your contributions.

trudy1980

Thank you was just confused by the bit saying contributions made through workplace will increase with inflation but direct debit contributions will not

dunstonh

trudy1980 said:

Thank you was just confused by the bit saying contributions made through workplace will increase with inflation but direct debit contributions will not

Projections are synthetic.  They have to use a range of assumptions.  The more complicated you make the assumptions, the more complicated the software is and the greater the cost.   Especially if the provider is not using in-house software but third party software.

So, with their projections, they choose to project personal contributions on a level basis.   They have also assumed employer contributions increase by 2.5% (a regulatory requirement)  even though inflation will vary. from that. 

Projections have nothing to do with the real world.   They are just figures used in the projection.  

Albermarle

trudy1980 said:

Thank you was just confused by the bit saying contributions made through workplace will increase with inflation but direct debit contributions will not

If you want you can increase or decrease your DD contributions to PP by any amount  you wish ( as long as you have enough earnings to support them ) 
PP are not mind readers , so they err on the side of caution . 
Anyway as Dunstonh says the whole projection about future income is just an educated guess anyway , and a rather pessimistic one .