Question 1

What are the projection assumptions?

Accepted Answer

The solid yellow line shows your current projection, which assumes investment growth of 5% every year. You can use the toggles below your projection to change the investment growth and choose from 3% (low), 5% (average) or 8% (high).

We’ve assumed inflation of 2.5% per year and one annual management fee of 0.7% taken from your pension each year. We’ve also assumed that your monthly contributions rise in line with inflation, so that they keep the same value in today’s money. When using the personal monthly or one-off contribution sliders, your projection will include the 25% tax top up from HMRC.

Question 2

Why do we include an assumed rate of inflation?

Accepted Answer

Inflation is the rate at which the cost of everyday things like food, transport and electricity increases over time. We’ve used 2.5% as this is the assumed annual rate of inflation used by the Financial Conduct Authority (FCA).

A projected annual inflation rate of 2.5% means the purchasing power of your pension reduces by 2.5% each year until your target retirement age. By factoring in this rate of inflation, the projected value of your pension at retirement is shown in real terms. In other words, how much your projected pension amount would be worth today.

If you’d like to better understand how far your savings will go in retirement, use our Inflation Calculator to find out how your pension could be impacted.

Question 3

What is the difference between personal and business account contributions?

Accepted Answer

Most UK taxpayers get tax relief on pension contributions. If you're a basic rate taxpayer, when you pay a personal contribution into your pension you'll receive a 25% tax top up from HMRC. This means that for every £100 you contribute PensionBee will add another £25 from HMRC, making it £125. If you're a higher rate or additional rate taxpayer, you may be able to claim more tax back through your Self-Assessment.

If you’d like to calculate how much tax relief you could get on your pension contributions, use our Pension Tax Relief Calculator.
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In contrast, if you choose to make an employer contribution through a limited company, it'll usually count as an allowable business expense.
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Employer contributions aren't "topped up" by tax relief, but your contribution can be offset against your company's corporation tax bill.

Read an in-depth overview of the distinctions between personal and employer contributions.

Question 4

How does taking a 25% tax-free amount work?

Accepted Answer

Pension withdrawal, also known as drawdown, becomes an option as soon as you reach the age of 55 (rising to 57 from 2028). At this point you can take up to 25% of your pension tax-free, as a lump sum or in portions. In the Pension Calculator it's assumed that you'll take your entire 25% tax-free amount, unless you push this toggle off. Taking a tax-free amount will only impact your current projection.

Question 5

What are the State Pension assumptions?

Accepted Answer

We've assumed that you'll be eligible for the full new State Pension of £12,547 per year (2026/27), and that it rises in line with inflation. We'll factor this annual amount into your current projection and target retirement income. We've used a State Pension age of 67. Under current law it's due to rise to 68 between 2044 and 2046 for people born on or after 6 April 1977, and this could change.

Question 6

How have you worked out my average life expectancy?

Accepted Answer

Research shows that if the increase in life expectancy continues through the 21st century, most babies born since 2000 in the UK will celebrate their 100th birthdays. With life expectancies steadily increasing like this we have chosen an average of 100 years, as we want to ensure all our savers have sufficient funds during retirement.

Question 7

What should my desired retirement income be?

Accepted Answer

Many people aim for a retirement income that's two thirds of their current salary. For example, if your annual salary is currently £30,000, then £20,000 per year would give you a reasonable retirement income. If you're likely to be eligible for the full new State Pension (£12,547 per year in 2026/27) then you'll find an option to include this within the Pension Calculator.