Pension Calculator

What is a pension calculator?

A pension calculator is a device which works out how much money you are saving a month, and what that is likely to pay you in retirement. A pension is a long term savings plan which will provide you with an income in retirement. There are many different forms of pension and this makes for a difficult job for a pension calculator, but, as a guide they are very useful for working out how much you should save for your retirement.

What does the pension calculator need to know?

The pension calculator needs to know how old you are now, how old you want to be when you retire, and how much money you already have put aside, and plan on putting aside each month until you retire. The pension calculator then works out what your pension will be worth when you retire.

It will then use projected annuity rates to work out what your pension will pay you on a monthly basis once you have purchased an annuity with it, so you can work out how much more you should be saving to get a comfortable level of retirement.

How accurate is a pension calculator?

When you are thirty years away from retiring a pension calculator will never be completely accurate. The calculator has no way of knowing what will happen to your pension investments, or the annuity rate between now and thirty years’ time, and is just a guide based on historical data and predictions.

It will however give you a good idea of how much money you should be saving towards your retirement, and many calculators will also ask you how much money you want to earn each month in retirement, and will tell you the difference between what you are saving now, and how much you should be saving for your future.

Why should I use a pension calculator?

A pension calculator will give you an idea of your pensions forecast, and will show you the gap between how much you are saving now, and your desired income in retirement. For those on final salary pensions then a pension forecast from your company will be more accurate, simply because final salary pension schemes work in a different way.