How much should I invest?
As a first step, think about your lifestyle. Would you want your retirement to be as good as your life today?
What would you do with an extra 35 hours a week? A few more holidays perhaps? Days out with the grandchildren?
Don't be forced into compromising your lifestyle because of a low income when you retire. Use our contribution calculator to help you work out how much you are likely to need to invest to try to achieve the income and lifestyle that you want when you retire.
Remember that any money you invest will be tied up until you take your retirement benefits, and that the value of your pension fund may fall as well as rise and is not guaranteed.
Notes
Remember your outgoings may not be as high as they currently are once you reach retirement. For example, you may have paid off your mortgage and you may receive income from other sources, including:
- State pension
To get a forecast of your expected State Pension you'll need to complete a BR19 form, available from your local office of the Department of Work and Pensions, and send it to the Benefits Agency. Alternatively go to the following site (http://www.thepensionservice.gov.uk/resourcecentre/e-services/home.asp). - Employer's pension
Ask your previous employers or their pension provider for a statement of what any pension with them may be in today's terms. - Personal pension
If you already have a personal pension plan, ask your financial adviser or pension provider for a statement of your projected pension, in today's terms. - Other Savings
If you have any other savings such as ISAs or Unit Trusts which could provide additional income in your retirement, these should also be taken into account.
Help
Help: Sex
This affects the cost of the pension/annuity, because on average women live longer than men and therefore the cost of their pension is usually higher.
Help: Current salary
This should include all taxable salary. You may also want to include any regular bonuses.
Help: Retirement age
You must take your benefits between the ages of 55 and 75 years. Also, please note that the minimum term to retirement for a Legal & General pension is five years.
Help: Index your contributions
Indexation means that your contribution automatically increases each year either by a fixed percentage or in line with the National Average Earnings Index, which is assumed to be 2.5% for the purposes of these calculations.
Help: Monthly contribution
Enter the actual amount you would like to contribute, the calculator will automatically add on basic rate tax relief at 20%. You can contribute, and receive tax relief on, up to 100% of your earnings in a tax year, or £3,600 if that is greater. The law and tax rates may change in the future and the value of tax relief will depend on your individual circumstances. If total contributions paid by you or on your behalf exceed an amount known as the Annual Allowance (£235,000 in the 2008/2009 tax year) then HM Revenue & Customs will impose a tax charge of 40% on the excess contribution. Contributions paid in the tax year in which you take all your benefits under a pension plan do not count towards the Annual Allowance. Don't forget that a higher rate taxpayer can currently claim back 20% additional tax relief via their tax return. The minimum monthly contribution to our Stakeholder Pension is £20 gross (before deduction of basic rate tax relief).
Help: Single or one-off contribution
You may want to start your plan with a lump sum contribution. Enter the amount you would like to contribute. The minimum single contribution to our Stakeholder Pension is £20 gross (before deduction of basic rate tax relief). You can contribute, and receive tax relief on, up to 100% of your earnings in a tax year, or £3,600 if that is greater. The law and tax rates may change in the future and the value of tax relief will depend on your individual circumstances. If total contributions paid by you or on your behalf exceed an amount known as the Annual Allowance (£235,000 in the 2008/2009 tax year) then HM Revenue & Customs will impose a tax charge of 40% on the excess contribution. Contributions paid in the tax year in which you take all your benefits under a pension plan do not count towards the Annual Allowance. You may wish to seek financial advice on this matter.
Help: Monthly income at retirement in today's money
To use this area, imagine that you are retiring today. Enter how much income you think you would need to live comfortably, assuming for example that the mortgage is paid off and the children have left home. Alternatively you may wish to enter this as a percentage of your current salary.
Help: Monthly contribution to your plan after we have added tax relief to it
This is the estimated contribution to your plan that you will need to make to achieve your requirements in retirement, this includes basic rate tax relief of 20%. Don't forget that if you are a higher rate taxpayer you can currently claim back 20% additional tax relief via your tax return. You can contribute, and receive tax relief on, up to 100% of your earnings in a tax year, or £3,600 if that is greater. The law and tax rates may change in the future and the value of tax relief will depend on your individual circumstances. If total contributions paid by you or on your behalf exceed an amount known as the Annual Allowance (£235,000 in the 2008/2009 tax year) then HM Revenue & Customs will impose a tax charge of 40% on the excess contribution. Contributions paid in the tax year in which you take all your benefits under a pension plan do not count towards the Annual Allowance. The calculator takes account of inflation in estimating the contribution you need to make.
Help: Monthly contribution to your plan after tax relief is added to it
This is the estimated contribution to your plan that you will need to make to achieve your requirements in retirement, this includes basic rate tax relief of 20%. Don't forget that if you are a higher rate taxpayer you can currently claim back 20% additional tax relief via your tax return. You can contribute, and receive tax relief on, up to 100% of your earnings in a tax year, or £3,600 if that is greater. The law and tax rates may change in the future and the value of tax relief will depend on your individual circumstances. If total contributions paid by you or on your behalf exceed an amount known as the Annual Allowance (£235,000 in the 2008/2009 tax year) then HM Revenue & Customs will impose a tax charge of 40% on the excess contribution. Contributions paid in the tax year in which you take all your benefits under a pension plan do not count towards the Annual Allowance.The calculator takes account of inflation in estimating the contribution you need to make.
Help: Required monthly cost to you
Don't forget that if you are a higher rate taxpayer you can currently claim back 20% additional tax relief via your tax return.
Help: Lump sum contribution to your plan after we have added the tax relief to it
Don't forget that if you are a higher rate taxpayer you can currently claim back 20% additional tax relief via your tax return.
Help: Projected fund value at retirement in today's money
This gives you an estimate of your future fund value in today's money, taking into account inflation.
Help: Monthly income at selected retirement age in today's terms
This gives you an estimate of your future pension value in today's money, taking into account inflation. This will be subject to income tax.