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CALCULATE YOUR PENSION REQUIREMENTS

The guide is for people who want to save a regular amount until they retire so they have a lump sum to invest when they retire to provide an income. The guide does not take into account any other pension arrangements or inflation after retirement. The guide shows you how to approximate the following:

Annual income you will need when you retire.

Amount you will need to invest when you retire to provide income.

The monthly amount you need to save to achieve your goal.

To calculate the annual income you will need to retire answer the following questions

You want to retire in (example - 20 years)

What annual income would you need to retire today taking into account you may not have a mortgage or need to provide for children (example - £25,000)

What do you you think the annual average rate of inflation will be between now and when you retire (example - 3.5%)

Now follow this formula

Using your own answers to the above questions multiply the amount you would need to retire today by 100% plus the rate of inflation as shown in the following example.

£25,000 x 103.5% equals £25,875

Now if you plan to retire in twenty years repeat the calculation a further 19 times until you have completed a total of 20 multiplications, one for each year before you retire.

Year 2  £25,875 x 103.5% equals £26,780.6

Year 3  £26,780.6 x 103.5% equals £27,717.9

Answer

The final answer in this example shows that (if annual inflation increases by 3.5% pa over the next 20 years) when you retire you will need an annual income of £50,000 to have the equivalent of £25,000 today.

Now calculate the size of the pension fund needed to provide the income

Now you know the annual income you need you can work out the lump sum you will need to invest when you retire to give you the income. Simply replace the red figures in the following examples with your own and do the calculation. You can choose to be a high or low risk investor.

Higher risk investor expecting 10% growth

A higher risk investor expecting 10% annual growth to provide an annual income of £50,000 must invest £500,000.

Divide £50,000 by 10% then multiplied by 100

Answer £500,000

Lower risk investor expecting 5% growth

A lower risk investor expecting 5% annual growth to provide an annual income of £50,000 must invest £1,000,000

Divide £50,000 by 5% then multiplied by 100

Answer £1,000,000

Now check for your age how much you need to save monthly to reach the example targets

 

Your age

Years to save

Approximate monthly savings needed to achieve target fund assuming 9% pa average investment growth

Target fund at age 60

 

30

30

£344

£500,000

35

25

£531

£500,000

40

20

£842

£500,000

45

15

£1,454

£500,000

50

10

£2,845

£500,000

 

Your age

Years to save

Approximate monthly savings needed to achieve target fund assuming 9% pa average investment growth

Target fund at age 60

 

30

30

£670

£1,000,000

35

25

£1,036

£1,000,000

40

20

£1,681

£1,000,000

45

15

£2,905

£1,000,000

50

10

£5,689

£1,000,000

 

 

CONTACT US

To contact us please use the Pension savings enquiry form to provide your objectives and personal financial criteria. Alternatively you can contact us by email or request we call you.

 

Tell us how much you can afford to save

If you tell us the amount you can afford to save, how many years you plan to save and if you want to save monthly, quarterly, six monthly or annually we will send you the follow type of illustration.

Savings of £200 per month for eighteen years will give you £90,850.

 

Find out how much you need to save

If you tell us the amount you will need to invest to provide a suitable income, how many years you plan to save and if you want to save monthly, quarterly, six monthly or annually we will send you an illustration showing you the regular amount you need to save to achieve your target..

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