pension question

[tali122]

what proportion of current income should you be aiming for to retire on a pension(including state and private). Also pension forecasts will give a figure at "todays prices" - does that take the future decades of inflation into account aswell?

[Chelsea97]

Hi Tali,

I did originally reply with a detailed answer but I'm afraid that it was too long to be accepted so I'll be briefer !

Firstly when working out how much you will need ask yourself a few questions about your current/future personal circumstances such as -

1) Will my mortgage be paid off by my retirement age or will I still need to cover those payments (or rent)?

2) Will I want to be running a car at retirement age (most local public transport for the over-60s is heavily subidised or free these days)

3) What other sources of income am I likely to have to supplement my pension? (eg savings, inherited money/property, capital released from possibly down-sizing your house etc)

The general advice is to start contributing to a pension fund as early as you can with as much as you can comfortably afford. Its difficult to assess the pension that this 'pot' of money will buy you when you retire because it will depend primarily on the performance of the stockmarket and just what the life expectancy is when you reach retirement age. I'm including a link to a pension calculator which will give you a rough estimate as to what sort of pension you could expect to receive based on your monthly contributions and current age. It should also cover your question about inflation too -

http://www.pensioncalculator.org.uk

I'd also advise to take a look (if you haven't already done so) at the quite radical changes to the state pension announced by the government last week as they affect people differently based on their age. The following link provides a clear and concise summary of them -

http://news.bbc.co.uk/1/hi/business/5015670.stm

Cheers

Mark