Pension projections - anyone know what they are based on

Check the small print but 2 possible factors: that £2k might be in today's terms so more actual cash relative to your projected final fund value and it's likely to be indexed linked too so increasing each year after retirement age. Still seems low though.

 

Just draw it all out in one lump sum and go enjoy yourselves. It's your money at the end of the day .

 

Don't you pay tax over anything more than 25% taken as a lump sum?

 

Guesswork

 

Annuity rates (pension income) are based ..where the trustees invest....mainly on intetest rates and long term guilts....
If you are talking about company (defined benefit or defined contibution)....a decentish rate of return is about 4%.
You also have to factor in people living too long and poor return in the investment as to why the returns are comparively low.
Dont forget the figures they provided you with may be linked to rpi so that the money you receive actually goes up each year.Ooh and dont forget thst the money is classed as earned income (after your tax free lump sum) and so will be taxed at source before you recieve it. ...at your marginal rate.You have your annual allowance to factor in too....so not all of it may be taxed.
Hope this helps

 

If it's a private pension you draw what you like, so "expect to draw" doesn't seem to make sense.

 

This seems to suggest that your figures are very pessimistic at best

http://www.sharingpensions.com/annuity_rates.htm

 

Ouja boards?

Slightly diffferent type of investment I know but.....
We had a 25 year endowment policy to cover the mortgage and kept getting the green 'on target' letter but, of course, the maturity value depended not just on the accrued guaranteed annual bonus but also the additional terminal bonus which is variable and ... Guess what.?? The year ours matured the terminal bonus was particularly low so it came up short. As it was only a few hundred pounds off its target and we had long since converted to a capital and interest mortgage the money was just a bonus anyway but it was still annoying.
We were bombarded with the mis-selling endowment spam mails but couldn't be bothered as the amount was not worth the bother pursuing. Still, it showed that the so called green letter safeguards to protect people with endowment mortgages on interest only repayments were 'anything but' as some on tight budgets could still have found themselves short when the mortgage term expired in spite of the green letters telling them all was OK and they were on target.
Pension funds incidentally are subject to govt policy anyway. Without getting political re nationalising privatised industries could have a major impact on future pension fund yields. That is just one example of why pension yeilds are hard to predict long or even medium term. Pension managers seem to do OK though re their remuneration!

 

Here's my thoughts for you.

Given that you are referring to a pension pot I assume that you are in a defined contribution scheme. This means that the pension you receive is wholly dependent on the value of your pot at retirement and how you choose to take your pension. This is in contrast to a defined benefit pension scheme where the amount you receive is determined by, typically, years worked and your salary. Under the defined contribution approach you carry all the risk whereas with defined benefit the risk is borne by your employer.

The illustration of converting cash into pension is making the assumption that at retirement you will choose to turn your cash in to a pension by buying an annuity with an insurance company. That used to be compulsory but you have the option of doing drawdown which means you can take amounts when you choose (55 and over) and can take 25% of the value tax free.

The conversion rate of 50:1 does look very poor but is only an illustration and will need to read the small print. If you are buying a fixed pension (not increasing in line with inflation or a fixed % each year) conversion rates for a 55 year old would be approximately 25:1 for an annuity with this falling to 38:1 for a pension with fixed 3% increases.

Buying an annuity does look expensive but this, in the main, reflects the fact that safe investments which insurers have to hold to back this type of payment, Gilts are only yielding circa 2% pa.

 

The best thing to do is completely ignore the projections they give you, they have to be ultra cautious on them.

Once you finish your current jobs or retire seek financial advice & get them invested in better performing funds.

If invested properly a £100k pot can last a long time, ideally even though you’ll be drawing on it in retirement you’ll still be making money as it’ll remain invested in drawdown.

So for example you might be drawing £800 a month but if the funds performing at 5% it’d only go down a couple of thousand a year due to your withdrawals as the rest of the pots performing well.

And 5% is probably been cautious. 2015 aside anyone invested in average risk funds or higher should’ve been earning 10% plus in 13, 14, 16 & 17.

 

Probably based on Nostradamus.....

 

ip dip doo

 

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What the illustrations don't show you are the fees. Which are about 50%.

Look at the illustrations again and halve the value of you pension pot for what the scheme puts in it's own pocket. Then work out what you could do yourselves with an isa etc. Then it begins to make more sense.

 

Doesn’t matter to me. I’ve been a self employed construction worker for years with a private pension so I expect to die at work at 87 years old

 

My entire pension plan is to sell up and relocate to the cheapest safe country at the time of retirement. Current favourites include Latin America, Albania, Bulgaria and Czech Republic (Thanks Brexiteers!), or possibly some of the cheaper Asian countries - Laos, Cambodia or Vietnam.

 

good mate lives in Cambodia. Great bars, local music scene, dirt cheap hotels, accomodation food and restaurants.Lovely people. Hoping to go in the next few years

 

Isn't that were Gary Glitter got busted .. ??