How Much Personal Pension Will I Get?
If you’re considering setting up a personal pension, no doubt you’ll want to know how much income it’s likely to pay out when you reach retirement.
In this article, you’ll learn how to work out what your personal pension entitlement will be, what kind of contributions you’ll need to make and more.
The following topics are covered below…
What will my personal pension income be?
The amount of income you can draw from your personal pension when you reach age 55 will depend on all of the following…
- How much money you paid into it
- How much your employer contributed
- The amount of tax relief you get
- How your investments perform
Personal pensions are a type of defined contribution scheme, which function like tax-efficient savings accounts. Your pension provider usually invests your funds in several assets (unless you have a SIPP, in which case you choose where the money is invested yourself) and applies for tax relief on your behalf.
How much is my pension worth right now?
Your scheme’s provider should send you annual statements to help you keep track of your personal pension’s value and many companies let you monitor this online. You can also contact your pension provider directly to request this information.
The overall value of your retirement investments will include any previous pension schemes you’ve paid into. Many people choose to transfer them into one account for easy monitoring and this is a service the advisors we work with can provide.
For a rough estimate of your personal pension income as things stand, the government’s online pension calculator, is a useful starting point. But for a more accurate, bespoke forecast make an enquiry to speak to an expert advisor.
How much do I need?
The general rule of thumb is that your monthly pension income should be two-thirds of your pre-retirement wage for the rest of your life, but this can vary depending on the standard of living you’re accustomed to and what your expectations are.
Bear in mind that you will also be entitled to the State Pension (assuming you eligible for it) which amounts to £8,546.20 per year at the time of writing.
The exact amount you need may depend on whether you will have substantial outgoings, such as a mortgage or dependent children, during retirement. The age you’re planning to stop working will also have a bearing on this.
Many people are unsure how much they will need to save in their personal pension pot to enjoy the standard of living they want during their retirement years, and this is where an independent financial advisor can help.
The pensions experts we work with can tell you how much retirement income you will need based on your needs and circumstances, and help you choose the right personal pension scheme for achieving this. Make an enquiry and we’ll introduce you to one of them for a free, no-obligation chat.
How much contributions do I need to make?
An expert will tell you that you should contribute as much as you can afford to your personal pension, assuming you want to live as comfortably as possible in retirement. You can make monthly contributions or pay in a lump sum.
However, be mindful that the maximum gross contribution you can make into a personal pension during the current tax year (2019/20) and still receive tax-relief is either £40,000 or 100% of your total earnings – whichever amount is lower.
The amount you should be paying in will also depend on the standard of living you’re expecting in retirement as well as how your investments are likely to perform.
If you make an enquiry, the experts we work with will carry out a free pension review for you to establish exactly how much you should be putting away each month and the best way to build up the desired amount of savings.
How long should I contribute?
If you don’t have a workplace pension, experts recommend starting up a personal pension as soon as possible and paying into it for as long as possible. Obviously, the longer you pay in for, the less likely you are to run out of money in retirement.
Even if you are enrolled into a workplace scheme, you are entitled to start up a personal pension to pay into on the side, and the amount of time you should spend making contributions will depend on how much you’re hoping to amass, how the investments perform and how much you can afford to pay in.
Make an enquiry and we’ll introduce you to an expert who can provide you with bespoke advice about the length of time you will need to pay into your pension for.
What growth rate and returns can I expect?
There is no right answer to this question and a large margin for error when forecasting how your pot will grow. The level of growth you can expect will depend on the level of risk you agree with your pension provider (or establish yourself if you’re paying into a SIPP) and how the underlying investments perform.
The only way to get an accurate picture of how your pension investments will grow is to consult with a financial advisor. They will present you with a low, middle and high forecast for your pot’s potential growth so you’re aware of the best and worst case scenarios. They can also provide you with investment advice and identify the course of action most likely to result in strong personal pension returns.
Speak to an expert
For a clear idea of how much your personal pension will be worth, how much you’ll need to save into it and how long for, call 0808 189 0463 or make an enquiry online. The advisors we work with can answer all of these questions and offer bespoke guidance based on your retirement needs and personal circumstances.
They will also lay out what your options will be when your personal pension reaches maturity and offer you a free, no-obligation pension review.