Full Pensions Audit

This is a complex calculator because it is a complex subject.

This calculator will help highlight how close to your target you are with regard to establishing a decent pension.

It will only provide a very general picture and we strongly recommend that we conduct a proper audit of your position in which we will assess all of your current arangements and make suitable recommendations. That said if you enter all the information correctly and it suggests that you need to save £300pm, and you are only saving £50 then it is fair to say that some additional planning will be needed.

1) Enter the rate of accrual as 60 for if you are in a 1/60th scheme, 80 if 1/80th etc: DEFAULT=1. Enter 1 if this section not applicable in your case to avoid divide by zero error in other math.
2) Enter the total number of years service you expect to have by the time you want to retire. Set at 0 if not applicable to you:
3) What is your salary as defined by the pension scheme? Normally only includes basic pay, no bonuses or overtime. Set at 0 if not applicable to you:
4) Enter the current value of long term savings. Set at 0 if none.
5) Enter your current monthly savings rate. Set at 0 if none:
6) Enter the number of complete years to retirement:
7) Enter your assumed growth rate, eg 1.09 for 9%:
8) Enter your assumed inflation rate, eg 1.05 for 5%:
9) Enter your desired annual retirement income, (in today's terms):
10) Enter your expected annuity rate, eg 0.1 for 10%:

Projected Fund:

Projected Pension using your annuity rate:

Projected Fund in real terms,(allowing for inflation):

Projected Pension in real terms using your inflation and annuity assumptions for fund based pensions, with any Defined Benefit pension added:

Explanatory Notes

The detail of pensions is very complex, however you can view this calculator as being two parts, to represent two sorts of pension.

The first of these are those schemes where your pension is contractually determined by your time of service and salary, and NOT affected by the fluctuation of the underlying funds. Parts (1)-(3) are for this type of scheme.

The second of these are those where the pension is determined entirely by the fund, and, by taking pension to mean retirement income, we also allow for it to include investments that are not legally structured as pensions, eg ISAs.

Of course most people have complex positions. The important thing when using this calculator is to avoid double counting - for example if you are a member of the first type of scheme you might be contributing £150pm, but £100 is to the scheme in general, and £50 is a personal top up, (currently worth £10,000). For the purposes of this calculator you ignore the value of the scheme (which you probably can't find out anyway), and only count the £10,000 in "current value of long term savings" and £50 in the "monthly savings rate".

• Accrual Rate - The rate at which you accumulate pension for each year of service. You need to know this. Guessing is very risky as it may lead to an over optimistic assessment of your pension position. That said most good schemes provide one sixtieth of salary for each year of service, (hence the oft quoted pension being 40/60, ie two thirds of salary for 40 years service with the same employer)

• Expected Years Service by Retirement - This refers to any time that you have spent or will spend in a good company defined benefits scheme (one that pays you a pension according to the number of years service, rather than according to the size of any fund that you may accumulate). Most large employer schemes are of this type.

  If you have been in such a scheme for ten years, and expect to stay until retirement in twenty more, then enter 30.

  If you have spent five years with such an employer and then left, enter five. However note that this calculator assumes that your current salary is the relevant one, whereas in fact presumably your scheme salary was lower. In this case the calculator will OVERESTIMATE your pension.

  If you have benefits from such a scheme and want to see how they affect you then run the calculator using the term, the salary value that you had when you left the scheme, and the term to retirement that applied when you left the scheme. This will be more accurate, but still not to be relied upon.

• Value of Current Investments - The current value of all of your long term savings, be they personal pension funds, shares, deposits etc. EG if £12,000 in pensions, £3,500 in ISAs/PEPs and £12,000 in deposits/shares etc enter 27500.

• Savings Rate - How much each year you are setting aside for long term investment, either explicitly to pensions, or implicity in general savings. If your arrangements seem to be falling short of your desired pension you need to adjust this figure to see how much you need to invest to meet your target. Include any employer pension contributions if known.

• Inflation and Growth Assumptions - Choose your own, but note that the highest growth rate allowed in formal projections is 9% (for which inflation is assumed to be 4.5%) and the cautious one is 5% (with inflation of 0.5%). As well as the absolute levels of each, it is important to understand that over the long term there cannot be a huge difference between growth and inflation, and differentials of over 4.5% will lead to over optimistic pension projections.

  Because of the way that the math operates there is an added complexity when considering the effect of Inflation on Regular Savings. In short if you invest £1000 a year then , because of inflation, it appears that each year you invest less and less in real terms. If you want to se what happens if you invest the same amount in real terms then set the Inflation at 1, and use a conservative growth rate.

  Enter in the form 1.06 for 6%.

  In the internal math the growth rate is reduced by 1% to represent fund charges, as per Stakeholder. Your actual pension costs may be different.

• Annuity Rate - Choose your own assumption, but if you want to be cautious then 6-7% is a good guide. Enter as a decimal, eg 0.07.

• Desired Pension - The annual pension you would like if you were to retire today.

• Projected Pension Fund - The value of the fund at retirement.

• Projected Pension - The pension that the fund will provide for your selected annuity rate.

• Fund Value in Real Terms - The value of the fund in todays money.

• Pension Value in Real Terms - This is the number that counts. The value in todays terms of your pensions, both from any fund, and from any employers scheme. State Pensions are ignored.

These calculators are offered for simple guidance. To obtain a more accurate appraisal of your position, please contact us.