Have You Calculated What Your Pension Will Be?

How do you intend to fund your life post-employment? And, how much money will you need to continue with your chosen lifestyle once you stop working? If, like many people, your answer is ‘I don’t know’, then now is the time to start thinking seriously about your pension. Indeed, ask any financial expert and they will tell you that the earlier you save for your retirement, the easier life will be when you do finally retire.

However, the subject of pensions can be a confusing one. Not only do you have to find a secure pension scheme suited to your needs, but you must also consider how much money you will need to pay for everything from living costs to leisure activities. This may seem like a daunting task, but there are tools available which can help you to plan for your future.

A pension calculator, for example, is a great tool for allowing you to calculate what you will receive from your pension, based on such information as what you earn, how long you have left to work and what your current savings are. By inputting this data into a pension calculator, you can then see if what you’re currently saving is adequate, or if it needs to be adjusted.

But, how much do you really need to save, in order to accrue a decent sum of money when you retire? Currently, according to a study of people’s attitudes towards their pensions, those that do save start at around 32 years of age and only put aside £59 each month. Based on the fact they want to retire at 58, and taking into account annual inflation, their pension will see them receiving just £1,716 a year. A far cry from the £24,000 the average person says they would like to receive.

In order to reach £24,000 then, and if you start saving at 32, you will need to put aside £1,068 per month. This however, for the average British worker, is totally unrealistic. Therefore, those with the financial know-how suggest that by starting to save at the age of 22 years, you could reduce this monthly amount by almost a third. Please remember that this is an example and not a real situation. To find out how much you may need to save, use a pension calculator or see a financial adviser.

It is up to you though, how much you want to save, and how much you think you will need to live on. So, regardless of the amount you are comfortable with, it is vital that you start thinking about your pension as early as possible.

A pension calculator is a great tool for allowing you to estimate how much you can save based on your current contributions, or what you could save, if you altered the amount you put aside each month and so help with planning to secure your financial future come retirement.

Warnings

• The value of an investment may fluctuate and is therefore not guaranteed. You may not get back the full amount of your investment.
• The above is based on the understanding, as at July 2009, of current taxation, legislation and HM Revenue & Customs practice, all of which are liable to change without notice. The impact of taxation (and any tax reliefs) depends on individual circumstances.

This article has been written for information and interest purposes only. The information contained within this article is the opinion of the author only, and should not be construed as advice or used to make financial decisions. Expert financial advice should always be sought and any links contained within this article are included for information purposes only.