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Pension Calculator

Assumptions

Important Note

The Pension Calculator model makes a number of assumptions in order to calculate the impact of the tax changes on the value of your pension fund.

The Pension Calculator will not predict the actual value of your pension. It only estimates the value of your pension pot based on the limited information you can supply and the growth assumptions we have made. The actual value of your pension pot will depend on your circumstances, the investments made by your pension fund manager, their performance and the fees and expenses charged. Another key element of the value of your actual pension is the level of annuity rates at the time you retire. Under present law, your pension pot is used to buy an annuity and, as annuity rates have gone down recently, the pension pot needs to be higher to give the same pension.

Please seek investment advice on this and all aspects of your retirement planning. In all cases, you should consult a financial adviser who is authorised by the Financial Services Authority to seek advice about your financial situation and how to plan for your retirement.

Performance

  • It assumes that your pension has been solely invested in the FTSE 100 (whereas pensions are usually invested in a diversified range of investments and move into lower risk investments the closer you get to your retirement age).
  • A compound growth rate of 13% (including 4% yield) is assumed for any contributions made before 1996.
  • The actual growth and the actual yield of the FTSE 100 have been been assumed for contributions made in the last ten years to date.
  • It assumes a retirement value of your pension pot based on Brewin Dolphin's view of the long term rate of return of the FTSE 100. This rate of return may well not match the actual returns of the FTSE100 over the years until you retire.

    A compound growth rate of 7.1% (including 2.9% yield) is assumed for the pension fund from now until your retirement date.

  • Monthly contributions attract growth at 1/12 per month of the total return achieved or predicted in each year.
  • The dividend tax credit was cut from 20% to zero for tax exempt funds in 1997 (e.g pension funds, charities etc) and we have assumed this level of reduction throughout.
  • Expenses and fees charged on your investments or by your pension provider are ignored.

Contributions

  • An increase in current contributions of 2% per annum is assumed from now until your retirement age.
  • Current contributions are reduced by 2% per annum back to your pension start date.
  • Employers' contributions are treated as gross.
  • Personal contributions are assumed to be net of tax and will be grossed up at the basic rate of tax only.
  • Basic rate tax has been reduced over the period from 24% (1997) to 20% (2008).
  • Maximum annual contribution allowed - £225,000
  • Higher rate taxpayers should claim back the difference between higher rate and basic rate tax in their annual tax returns.
  • The 'Step 3 Results' box shows the impact of a 1 year break from contributions from today.

Value and Limits

  • Current pension value is assumed to be the value of your pension at the previous financial year end.
  • The calculator does not take account of any fees and expenses that may be levied at any stage on your pension. These may be sales and management fees and also the expenses incurred by your pension fund manager when buying and selling shares and investments.
  • Under current pension law, your pension pot will be taxed if it exceeds a maximum fund limit (which is £1.6m for 2007/2008). If your pension pot significantly exceeds this limit (the limit will increase over time), you should consult a financial or tax adviser.
  • Please note that in April 2006 the minimum retirement age was increased to 55 (phased*).

*Please seek professional advice on this and all aspects of your retirement planning.