
Financially planning for retirement can often seem daunting, but our Pension Calculator simplifies the process. Learn how it can give you a clearer picture of what your pension could be worth by the time you retire and whether your current pension savings are on track to meet your financial retirement goals.
Pension Calculator
The Pension Calculator considers a number of factors to estimate how much income you might receive when you retire. These include:
- your planned retirement age;
- how much annual income you’d like to receive;
- the current value of your pension savings;
- your pension contributions; and
- an assumed inflation rate of 2.5%.
Once you learn how much you’re on track to receive at retirement it becomes easier to see whether you want to make any changes. For example, you may decide to increase your monthly contributions now to help you retire earlier. Adjusting the calculator’s sliders will show how much income you’re on track to receive relative to what you hope to receive.
What information will I need to use the Pension Calculator?
To use our Pension Calculator you’ll need to enter:
- your current age;
- your planned retirement age;
- the current value of your pension savings: the total amount you’ve already saved across all your pension pots;
- desired annual retirement income;
- personal monthly contributions: how much you plan or are currently contributing to your pension each month until you reach your desired retirement age; and if you’re employed, add how much your employer pays into your pension each month.
How the Pension Calculator works
What the graph shows
As you enter and adjust your figures the target and project income lines will automatically update.
Target and projected income
The grey dotted line shows your target retirement income based on:
- your desired retirement income;
- an average life expectancy of 100 years; and
- a growth rate of 4% before inflation during your retirement.
The solid yellow line shows how much in total income you’re projected to have based on the combined value of your pension pots, contributions, the age you wish to retire and an inflation rate of 2.5%.
You’ll also notice a yellow area around your projection lines. This represents the high growth (assuming 8% growth) or low growth (assuming 3% growth) potential of your investment. This provides an idea of how much higher or lower your pension’s value could be relative to your projected retirement income if these assumptions hold true.
Assumptions the Pension Calculator makes
There are a few things that could impact your pension’s value and how long it’ll last like the rate of inflation and how long you live. To generate your projected income our Pension Calculator makes a few assumptions. These include:
- an average life expectancy of 100 years;
- an inflation rate of 2.5% per year;
- a growth rate of 4% before inflation;
- a management fee of 0.7% taken from your pension each year; and
- when using the personal monthly or one-off contribution sliders, your projection will include the 25% tax top up from HMRC.
How the Pension Calculator can help you
Identifying shortfalls
If you find a gap between your projected and desired income you can try adjusting your target retirement income or increasing your retirement age to see how those could make up any difference.
Monitor progress
If there’s a change in your circumstances you can reflect those on the calculator to see how it might impact your potential income. For example, if you’re able to make a personal one-off contribution or your employer’s increased their monthly contributions to your pension, simply adjust the sliders alongside the others to see how these change what you may receive.
Setting savings goals
Understanding your projected income can help set savings targets so you can budget your finances to help you reach your desired retirement income.
Combine with our other calculators
We have a range of calculators each designed to help you manage a different aspect of financial planning for retirement. Using these together can help you prepare for your future. For example, once you know how much income you may need in retirement you pop that figure into our Inflation Calculator. This’ll show you the impact inflation may have on how much your projected pension could be worth in the future.
How much do you need in retirement?
To get the most out of the calculator it’s helpful to have an idea of how much you may need in retirement. However, working out what that should be can be challenging. Thankfully, the Pensions and Lifetime Savings Association (PLSA) offer a helpful guide in the form of their Retirement Living Standards. This helps you understand how much you may need based on three living standards. You can also read more about those and other retirement planning information on our retirement hub.
Future product news
Keep your eye out for our next product blog or catch up on previous posts. We’re looking forward to spotlighting more of our handy features and free financial tools plus we’ve got lots of great new updates in the works we’re looking forward to bringing you. Once released, we’ll let you know what they are and how they can help you save for a happy retirement.
Risk warning
As always with investments, your capital is at risk. The value of your investment can go down as well as up, and you may get back less than you invest. This information should not be regarded as financial advice.