Pensions calculator: what you need to know
A pensions calculator is a great way to ascertain how much you should be saving to achieve the pension you desire. With so much information available and so many options to choose from, it can be hard to decipher how much you should be saving each month and which type of pension you should choose.
Using a pensions calculator, you can work out at when you will retire based on your current age. The retirement age is due to rise in stages during the coming decades, so it is important to check which period you will be retiring in - and thereby your retirement age - with a pensions calculator.
Then, based on your current salary, you can discover how much money you need to put aside each month to achieve your retirement target. If you already have some savings, a pensions calculator can take this into account too and adjust your monthly savings target accordingly.
What are the different types of pension to consider with my pensions calculator?
Using a pensions calculator can be really useful in planning your long-term finances. However, you will also need to consider the different types of pension available to you - and what each of these can offer.
Private pensions are available through several institutions, such as banks, life insurance companies and buildings societies. With these, you can invest any amount of money per month, be that more or less than that suggested by a pensions calculator, and you will get tax relief on the sum you add. However, be mindful that most private pension plans will have an annual limit on how much you can add that will be tax-free.
Meanwhile, you may wish to invest your monthly savings suggested by a pensions calculator into a workplace plan. These vary from employer to employer and come in several standard formats.
It is common to see workplace pensions be contributed to by both employee and employer on a monthly basis, as well as by either party alone. As with private pensions, you will receive tax relief up to the annual allowance specified in your plan.
Pensions calculator: other factors to consider
When using a pensions calculator to plan your finances, there are other factors to consider besides how much you should put aside each month and what type of pension you should select.
For example, if your pensions calculator findings show that your target pension could be a little hard to achieve, you may want to consider working past your retirement age. When you do, you will not be charged national insurance on your earnings and you can receive it in addition to your state pension. Alternatively, you may be able to draw a lump sum later on.
Of course, you may also need to consider other demands on your finances, such as mortgages, when planning how much you intend to save.
Where can I find further advice on my pensions calculator findings?
Once you have used a pensions calculator to ascertain your basic savings goals, you may be looking for further advice on how to save and the various plans available to you, or the benefits you could receive.
There are several organisations geared towards helping people structure their financial plans and achieving their desired pension sums. The Pensions Advisory Service is one such body, offering free advice to help you understand both private and work-based schemes.
Alternatively, the Financial Services Authority, which regulates financial services in the UK, offers detailed information about pension providers and services.