Full Pensions Audit

This is a complex calculator because it is a complex subject. When using the calculator you will need to make assumptions, please note any assumptions made we cannot be liable for and you should always seek professional advice rather than rely on your own knowledge.

This calculator will help you estimate how close to your pension target you are.

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 arrangements. That said, if you enter all the information correctly and it suggests that you need to save £300pm and you are only saving £50pm then it is fair to say that some additional planning will be needed.

*This calculator assumes that you use the whole fund for pension. In reality you may take some of it as tax free cash.

Explanatory Notes

  • 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
  • Expected Years Service by Retirement - This refers to any time that you have spent or will spend in a 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).

    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 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 test Investments - The value of all of your long term savings, be they pension funds, shares, deposits etc. e.g. if £12,000 in pensions, £3,500 in ISAs 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 implicitly 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 calculator 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 see 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 calculation the growth rate is reduced by 1% to represent fund charges. Your actual pension costs may be different.

  • Annuity Rate - Choose your own assumption. Enter as a decimal, eg 0.05. Actual annuity rates depend on age, details, and long term interest rates. To find out more, contact your financial adviser.
  • Desired Pension - The annual pension you would like if you were to retire today.

Warning note – the Lifetime and Annual allowances are both ignored in this calculation. The purpose of the audit is to demonstrate complexity and to encourage the seeking of specialist advice.