When it comes to retirement research, pension calculators are a tool that you might find across various provider and guidance websites. Intended to provide answers to questions such as “How much do I need to save for retirement?” or “What is my current total for retirement?”, pension calculators have an array of benefits to offer to up-and-coming retirees.
While many might find them helpful aids in gaining information on their pension, others may be unaware of the insight they offer or not know quite how to use them. That’s why, as your pension experts, we’re here to share all the knowledge you need on pension calculators!
A basic how-to
To get started, the information required from a pension calculator depends on what kind of pension calculator it is. For example, a pension calculator to determine your retirement income (the amount of monthly income you will need to sustain your current lifestyle in retirement) usually ask for:
• Your date of birth
• Gender
• The age you’d like to retire
• Gross salary/income
• Pension pot values
• Any pension contributions you’re currently making
• How much of your pension you’d like to take as a lump sum
The answers you submit relating to your gross salary, current contributions, and pension pot value will be used to conclude your yearly pension income. You might think details such as your gender and date of birth might be unnecessary when calculating your income after work. However, this is all used to evaluate your State Pension age and the grand total you’d receive with the inclusion of State Pension payments. This type of pension calculator is especially beneficial if you’re wanting a general idea of what income you can expect from all avenues of pensions. Many of these calculators are programmed to align your date of birth with your expect State Pension Age (based on previous patterns of State Pension age as a result of government changes), so whether you’re retiring in the next 5 years or 50 years, you can believe it to be a realistic forecast.
In addition to this, you might come across pension calculators like a drawdown calculator. This type of calculator will use the above factors to determine how a drawdown pension scheme could help your pension pot to last longer. Furthermore, it can also present an approximate forecast of investment growth throughout your retirement.
Drawdown calculators will require information such as:
• Your age
• Annual charges
• Growth target
• Required annual income
• Pension fund value
After providing this information, the calculator will work its magic and provide a total based on the information you’ve provided. The total given is an illustration of what impact growth rates and life expectancies could have on the longevity of your pension. It should be mentioned that while the figure you get will be as accurate as the details it’s been given, your prediction from the calculator should only be taken as a general idea for your retirement income and not a certain total.
Pension calculator benefits
Although any totals supplied by pension calculators should be taken on the premise that it’s only an estimation, they do still pose various benefits for those planning for their retirement. Such benefits can include offering the knowledge of whether your current pension contributions will keep you on track for the retirement income you’d like. If not, it provides the opportunity to reassess your retirement strategy and adjust your contributions to meet your needs.
There’s also the matter that many pension calculators are both free and anonymous tools to use, meaning (on the basis that you’re using a calculator via the page of a trusted provider) all information you use will be safe.
Seek advice
Pension calculators are a good starting point for your retirement journey, their results should not be seen as a definitive recommendation.
After all, pension calculators are technology-generated tools, meaning they do have their limitations. As we’ve previously mentioned throughout this blog, any figures retrieved from pension calculators should only be taken as an estimate.
Therefore, we strongly recommend seeking advice before making any major changes to your pension or investment plans.
When it comes to seeking a tailored, personalised plan to suit your financial needs and goals, advice is generally the most beneficial option. For example, at My Pension Expert, our team of independent financial advisers have the expertise to assess your income and pension pot value alongside the income you’d like for your retirement and design a strategy to suit this. What’s more, our team will conduct a whole-market search to make sure you’re placed with the best pension scheme that will make your pot work for you.
Nevertheless, paired with financial advice, pension calculators are a good starting point to understand your pension fully, and ultimately secure the financial future you want.
To get started on your retirement journey, click here.