12 min Read
28 Sep 2016

Written by Damien

Damien is one of the most widely quoted money and investment experts in the national press and has made numerous radio & TV appearances. He created MoneytotheMasses.com while working in the City when he became disillusioned with the way the public were left to fend for themselves because they could not afford financial advice.

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How to Quickly and Easily Calculate your Pension

Free pension calculator

Our pension calculator will help your retirment planning

Pension Calculator

Our pension calculator is specifically designed to allow you to:

Simply click on the relevant link above to jump straight to the relevant section explaining how to use our free pension calculator and receive your free personal pension calculation. The calculator uses the base assumption that:

  • your pension pot will grow at 5% per annum before taking into account the impact of inflation and charges
  • that inflation will be at an average of 2.7% a year
  • that the annual management charge applied by your pension provider will be 1.5%

You can change these assumptions to whatever you want them to be in the advanced settings sections at the bottom of the pension calculator input page. However, the preset assumptions are realistic.

In this article I also show you:

How much pension will I get when I retire?

Open the retirement calculator and follow the steps below:

  1. Enter your date of birth
  2. Enter your current gross salary (that means before tax is deducted)
  3. Enter the size of your existing pension pot (if you have one)
  4. Now enter your monthly pension contributions as well any employer contributions. If you don't currently pay into a pension you can enter 0 for both sections
  5. Choose the level of tax-free cash you'd like to take from your pension pot when you retire. The maximum tax-free lump sum you can take at your retirement age is 25% of your pension fund.
  6. Choose your retirement age. If you don't have a retirement age in mind then use the average UK retirement age of 65.
  7. Then enter your email (we email the results to you so that you can keep them and refer to them later) and click calculate.

You will receive a pension projection showing your likely pension fund (in today's money) and retirement income (again in today's money which means that it accounts for inflation) as well as the size of your potential tax-free lump sum.

How much do I need to retire comfortably?

After using the retirement calculator, as described in the steps above within the section 'How much pension will I get when I retire?', is the pension calculation what you were hoping for? Is the forecast of your likely retirement income more than what you'd need to live off or is there a retirement shortfall?

If there is a pension shortfall then follow the steps below:

On the pension calculations page click on the button 'increase pension contribution'. Steadily increase the level of pension contributions until your projected retirement income is at a comfortable level.

Alternatively you could:

  • choose to delay your retirement which will give your pension pot time to grow further and provide a larger retirement income. You can see the impact of deferring your retirement age by clicking on the 'Delay your retirement' button.
  • reduce the size of the tax-free cash sum you've chosen to take. You can do this by going back to the pension calculator input screen. The less tax-free cash you take the more pension fund you have to produce a retirement income via an annuity or pension drawdown

How much do I need to put into a pension to retire at 60?

To calculate how much you need to put into a pension to retire at age 60 follow the steps laid out in the 'How much pension will I get when I retire?' section above but set the retirement age on the pension calculator to age 60

Then while leaving the retirement age at 60 follow the additional steps specified in the section 'How much pension will I get when I retire?' and calculate how much you need pay into your pension to retire comfortably at age 60. You may have to increase your contributions or reduce the tax-free lump sum you wish to take. Alternatively you may need to alter the advanced settings at the bottom of the pension calculator and reduce the Annual Management Charge (AMC) assumption while increasing the projected gross return. The former replicates what would happen if you reduced the cost of your chosen pension provider (perhaps by transferring your pension to a cheaper personal pension or SIPP) while the latter reflects what might happen if you take increased investment risk.

How much do I need to put into a pension to retire at 55

Use the pension calculator in exactly the same way as described above in the section 'how much you need to put into a pension to retire at 60' but instead set the retirement age to age 55.

What's the minimum amount I need to put into a pension?

To calculate the minimum pension contributions you need to be paying into a pension you need to use the pension calculator more like a pension contribution calculator. The pension calculator assumes that you will want a salary equivalent to two thirds of your salary. If you know how much you'd like to have as a pension income each year in retirement (but in today's monetary terms i.e ignoring inflation) then divide it by 2 and multiply that number 3. Then input this figure as your current gross salary in the pension calculator.

Now set your retirement age to the age at which you would like to retire and fill out all the other fields, such as pension contributions, honestly. When you click calculate you will see your projected retirement income. You will notice that there is a bar above the results which tells you how much of a shortfall you will have in retirement income based on your existing pension fund and planned pension contribution levels.

Now you can use the buttons at the bottom of the pension projection page to delay the start of your pension contributions, delay your retirement or increase your pension contributions to see the impact on your pension income.

You can also jump back to the input screen and reduce the percentage tax free cash that you plan to take. This will mean that your have a bigger pension pot to use just to produce a retirement income and so reduce your pension contributions to a bare minimum.

In addition in the advanced settings of the pension calculator, at the bottom of the pension calculator input screen, you can test the impact of cutting investment costs to a minimum as well as taking more investment risk in the hope of greater returns. To do this simply reduce the assumed Annual Management Charge and/or increase the Estimated Annual Growth rate of your pension fund.

By changing the inputs and assumptions as described you can quickly calculate the minimum pension contributions you need to be paying into a pension to achieve the retirement income you want.

Project the impact of early retirement

Use the pension calculator as per the scenario listed below which is most relevant to you in order to first build your base scenario. Then simply go back to the input page and reduce your retirement age to see whether you can afford to retire early.

When can I afford to retire?

You can use the pension calculator to calculate at what age you can afford to retire. To do this follow the steps set out in the scenario 'How much do I need to retire comfortably?' In doing so you will quickly calculate your retirement age.

Your basic state pension

Our pension calculator deliberately doesn't include your state pension because:

  • the amount of state pension received varies depending on individual's circumstances
  • you shouldn't overly rely on your state pension when retirement planning because future Governments could reduce or abolish the state pension altogether

However, below I tell you how work out how much state pension you will receive and when you will get it.

How to calculate my state retirement age?

The first thing to do is to calculate your state retirement age, which is the age at which you will start receiving your state pension. To calculate your retirement age use the official state pension age calculator.

How to calculate my state pension?

It is often difficult to accurately calculate your state pension yourself, especially as there is no simple state pension calculator.  That's because the amount of state pension entitlement depends on your own National insurance Record. Instead you need request a state pension forecast from HMRC.

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