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The pension calculator looks to see if there’s a difference between the retirement income that you want and the forecast income from the pension and savings you’ve built up so far. If there is a shortfall, it estimates how much you need to save to fill the gap.
You decide the retirement income you want, but the pension calculator guides you on assessing the income you may need in retirement.
You can find out how much pension you’re likely to receive from your current retirement savings by checking the benefit statements that you should receive each year.
If you have some non-pension savings earmarked for retirement, the pension calculator takes the amount of those savings, assumes they are left to grow between now and your chosen pension age and then converts them to income using the annuity rate for someone of your gender and chosen pension age. (Note, that from December 2012 different annuity rates for men and women will become illegal and unisex rates will apply.)
Of course, you might not buy an annuity but this method gives a reasonable guide to the sustainable income you could draw from those savings in retirement.
If your current savings mean you’re on track for a lower retirement income than you want, the pension calculator works out the monthly savings you might need to make between now and your chosen pension age to produce a large-enough pension fund by then to meet the pension gap.
The pension calculator converts the pension fund to income by using the annuity rate for someone of your gender and chosen pension age and, if you have said you want an income for a partner, assumes that half the amount of pension continues if you die first.
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