£300k difference in SIPP forecast...can someone please help me understand

sgebbie

Hi
I have a junior sipp for my 4 year old which has currently got £5,115 in it and I make regular £100 deposits per month.
HL (attached and also https://www.hl.co.uk/pensions/junior-sipp/junior-sipp-calculator) says it'll be worth about £150k  when he is 65 but other calcs say vastly over that using the same numbers. £5,115; £100pcm ; 6% pa; for another 60 years
eg, https://killik.com/resources/calculator/
that shows about half a million.

I am completely confused, how can it be so very very different
 am I fundamentally missing something in my logic on how sipp works?

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dunstonh

Projections are just a calculation using assumptions.   If you change the assumptions, then the end result will change.

For example, if you use a calculator that doesn't include inflation vs one that does.    Or you use one that calculates net of charges vs one that is gross of charges.

HL is using 6.43% before charges with a further 2.5% deduction for inflation.
What was your alternative calculator using?

EthicsGradient

dunstonh said:

Projections are just a calculation using assumptions.   If you change the assumptions, then the end result will change.

For example, if you use a calculator that doesn't include inflation vs one that does.    Or you use one that calculates net of charges vs one that is gross of charges.

HL is using 6.43% before charges with a further 2.5% deduction for inflation.
What was your alternative calculator using?

And in the HL explanation, it says "this is in today's money, and takes into account the effects of inflation on the buying power of your pension", while Killik says "for illustration purposes only, assuming annual compound interest, ignoring inflation".

Ben_Fogles_Dog

Because the HL one is assuming that you aren’t making any further contributions and is just looking at the annual growth on the current value.

sgebbie

Ben_Fogles_Dog said:

Because the HL one is assuming that you aren’t making any further contributions and is just looking at the annual growth on the current value.

It specifically says on section 4, underlined: adding an extra £100 pcm would result in this....


I think the issue is that HL probably uses 2.5% pa (stated 6.4% minus quite a large inflation)

boingy

And forecasting anything over 60 years is never going to be remotely accurate.
I suggest you treat all the illustrations with a large pinch of salt and just keep sticking money into it. You're giving your lad's pension a brilliant kick start. 

EthicsGradient

sgebbie said:

Ben_Fogles_Dog said:

Because the HL one is assuming that you aren’t making any further contributions and is just looking at the annual growth on the current value.

It specifically says on section 4, underlined: adding an extra £100 pcm would result in this....


I think the issue is that HL probably uses 2.5% pa (stated 6.4% minus quite a large inflation)

No, seriously, it's because the HL one explicitly allows for inflation, and the Killik one explicitly does not.

dunstonh

I think the issue is that HL probably uses 2.5% pa (stated 6.4% minus quite a large inflation)

the HL one is 6.4% is gross of charges. 
The killik one is net of charges

In addition to Killik not making an inflation deduction.