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Pension Calculator: Your Retirement Fund
Are you just starting out saving for retirement? Or do you want to check that your pension savings are on course? We all want to be able to enjoy life after work comfortably, whether that involves seeing more of the world or spending more time with your family, and it can help to understand how much you could have for retirement based on your current savings.
Our simple pension calculator can help you to get an idea of how much will be in your pension pot when it comes to retiring. It can also be helpful in letting you know if you need to start saving more for the future.
Remember, the results shown in the pension calculator are only a guide, meaning you won’t be guaranteed the amount shown. For a more comprehensive discussion around your pension and goals, give us a call on 01257 260011, or fill in our contact form and we will get back to you.
How to Use the Pension Calculator
The Money Advice Service is impartial and backed by the government. Their pensions calculator is a useful tool that can help you understand your future pension income.
Using the pension calculator:
- The calculator will ask for details about your current standard of living, your existing pension savings (e.g. a workplace pension) and then it will calculate how much you are likely to receive in retirement.
- You can then adjust how much you’d like to save to see how much extra retirement incomes this will provide.
- The calculator makes a number of assumptions about the future - these can be seen alongside the results of your calculation.
- The calculator automatically assumes you will convert your pension fund into an annuity; however, there are more options available.
How Much Should I Aim to Have in my Pension Pot?
How much you have in your pension pot depends on what you’re willing to contribute and how your investments perform. By understanding what you can afford, you will be able to make smarter decisions when planning for the future.
Many people aim to have a pension pot totalling two-thirds of their current salary by retirement. For example, if you have a salary of £30,000 per year, then £20,000 per year could be your pension pot goal. If you’re eligible for the State Pension, the pension calculator above will work out your retirement income to include this in the total amount.
For more advice on being ready for retirement, take a look at this blog post on preparing for future life.
What Pension Options are Available When I Retire?
Once you have an understanding of how much income you need for your retirement goals, you may want to consider the pension options available to you upon finishing work. Here, we take a look at the main options:
An annuity allows you to convert your pension fund into a regular income that lasts for the rest of your life. You will receive guaranteed fixed regular payments each year until your death. However, if you die sooner than expected, an annuity will not allow you to leave what remains of your pension to your family. You are, however, able to add guaranteed payment periods after your death in certain circumstances.
A drawdown allows for varying amounts of capital to be taken from your pension pot, depending on your wishes. Your money will remain invested when you reach retirement, which can be risky if your fund falls in value.
However, if there is growth, it can provide higher returns and see your pension pot increase in value.
3. Phased retirement
A phased retirement is when you phase in portions of your pension fund over several years. This can be useful if your retirement is staggered. The technical term for this is uncrystallised funds pension lump sums (UFPLS). By ‘uncrystallised’, this means the money hasn’t been moved out of your pension pot into another product, such as a drawdown or annuity.
In simple terms, it means you can use your pension in a similar way to a bank or savings account, taking money out when you need to, while the rest continues to grow.
4. Whole pension
It is possible to take your pension all in one go, with the first 25% of your pension being withdrawn completely tax free. The rest of your pot can be withdrawn at a marginal rate - 0%, 20%, 40% or 45% - depending on how much money you take out.
In Scotland, tax is paid at a rate of either 0%, 19%, 20%, 21% or 45%.
To find out more about how True Bearing can provide you with pensions advice to support your retirement planning, get in touch with us today to arrange a one-to-one introductory session. This meeting will be at our expense, and will give you an opportunity to work out what kind of pension plan will suit you best, based on your goals and circumstances.