Pension Calculators

Philski_2

My wife and I have two pensions each [All Personal].
In total current funds add up to 70k
We're in are early 40s and looking to retire
in 15/20 yrs.
We have young family and can't afford to pay anything in for a least another two years [costs of child care etc]

How much do we need to save to give us 2k per month?

What sort of final pension pot are we talking about?

Is there a pensions calculator anywhere where I can put in the current value of the fund?

Thanks

sleepless_saver

this one lets you put in existing fund

http://money.guardian.co.uk/calculator/form/0,1456,603163,00.html

Debt_Free_Chick

A word about calculators. You can make the numbers look very appealing/affordable, simply by being unrealistic about the future. Especially investment returns. Over the long term, an investment return of 2% above inflation (e.g. 3% inflation + 2% = 5%) is realistic. 3% above inflation is optimtimistic and 4% above inflation could only be achieved if you are prepared to take some risk with your investments.

And the annuity rate at retirement reflects how long you are expected to live. We are all living longer. In 20 years time a 60 year old could well be expected to live for a further 30 years. This means that the value of your pension plan then, needs to be enough to pay your income for 30 years.

Play around with calculator. Put in optimistic and pessimistic numbers e.g. what if your fund only grows by inflation + 1%? Start with your current fund and assume you pay nothing more. How much does that provide? How much do you then need to pay to get up to your target retirement income.

The only way to be sure you will have enough income is to save - lots. There are no magic answers here. It's nothing to do with pensions ....

dunstonh

Ok making the following assumptions.

Exisiting fund: £70k
Term to retirement: 22 years
ignore state pension
target income £2000 pm
assumed rate of growth 5%
assumed charges 1% amc
annuity based on Joint (2/3rds benefit), age 55 and RPI
Inflation ignored

Your current 70k is 22.75% towards requirement.
To achieve target you need to have monthly contributions of £1312pm gross.

If you cant afford contributions now, plus i have done it for 22 years not 15/20, then its not looking likely for you i'm afraid.

Pal

Assuming an investment return of 5% is very cautious. It assumes you are investing in something very safe like Government bonds. Over 20 years one would hope that corporate bonds or equities could outperform both of these (although it is a risk), but a 6% or 7% return might be more appropriate.

Assuming a spouse aged 62 and 50% pension would probably be more appropriate although the difference in final pension would not be enormous.

That said, the impact of inflation over the period will be significant, as £24k a year might not be enough in 20 years time.

Finally, some of that £24k a year will come from state pensions, so you can knock that off the £24k target from your personal pensions. The DWP will be able to give a projection of your state pensions that you can use for this.

Could you speak to the IFA you used to set up the personal pensions? Alternatively, visit the providers websites. Many have pension calculators on them or helplines you can phone.

dunstonh

If he is looking at age 55ish then state pension should be ignored.

5% is cautious but the shorter the term, the more cautious you should be.

replacing the same figures above with 7% in place of 5% and the requirement would be: £846pm

TrickyTrotter_2

I know we are not comparing apples with apples, but why is 5% cautious for a pension investment, but not for an endowment policy?

dunstonh

I know we are not comparing apples with apples, but why is 5% cautious for a pension investment, but not for an endowment policy?

5,7, & 9 are the growth rates used for pension funds due to the taxation advantages over life funds.

Also, when we say cautious, you could be either indicating caution on forecasting the rate of return or choosing lower risk funds with lower potential but less volatility.

Philski_2

Thanks for your input.

I must say I am supprised at how fuzzy the who task of forcasting your pension really is. The variables are just to many. All we can really do is guess at the figures and be appauled at how little we're going to get.

I would like to see some better calcualators. I know at some point in the future we're in line for an inheritance [yet another variable].
I would like to factor this in.

Is there a calculator you can just put in a final pension fund value
and your retirement date?

I think its going to be a case of [ Its retirement jim but not as we know it].

Philski

dunstonh

Im sure that there are some very simple calculators out there but the problem is that they wont take into account many of the variables.

ie:

do you want tax free lump sum (kiss goodbye to 25% of the income then if you do).

do you joint life or single life annuity (joint less is about 25-50% lower than single life)

do you want level or increasing annuity (increasing starts about 35% lower than level).

do you include inflation or not (probably best not to but have an increasing contribution to keep up with it).

The good calculators can factor in a number of things but they cost money. The free calculators will not factor in as much. As is life, you get what you pay for.

Darryl

Why have none of the IFAs linked you to this, I wonder...?

http://www.pensioncalculator.org.uk/pages/home.php

Darryl.