Estimate the current value of your defined benefit pension.
Understanding Your Pension Valuation
A pension valuation, particularly for defined contribution (DC) schemes, is a snapshot of how much your retirement savings are currently worth. It's crucial for understanding your progress towards your retirement goals and making informed decisions about your financial future. This calculator helps estimate the future value of your pension pot and assess its potential to provide your desired retirement income.
How the Valuation is Calculated
This calculator uses a compound growth formula to project the future value of your pension pot and then estimates the total income it might generate throughout your retirement.
1. Future Pension Pot Value Calculation:
The calculator first projects the growth of your current pension pot and your future contributions until your anticipated retirement age. The formula for compound growth is:
n = Number of times the interest is compounded per year (assumed 1 for annual)
t = Number of years until retirement (Retirement Age – Current Age)
C = Annual Contribution
In our simplified calculator, we calculate the future value of the current pot and future contributions separately and then sum them up.
2. Estimated Retirement Income:
Once the future pension pot value is estimated, the calculator can provide a rough indication of how long this pot might sustain your desired annual income. This is a simplification, as actual drawdown strategies (like annuity purchase, phased withdrawal, or lump sum) vary significantly and are influenced by factors like tax implications, inflation, and investment performance in retirement.
The basic calculation for the number of years the pot could last is:
Years Pot Lasts = Future Pension Pot Value / Desired Annual Pension Income
This calculation assumes the pension pot remains static in value once retirement begins, which is not realistic. In practice, remaining capital would likely continue to grow or be drawn down, influencing its longevity.
Factors Affecting Pension Valuation:
Investment Performance: Higher growth rates lead to a larger pension pot.
Contributions: Regularly contributing more significantly boosts your savings.
Time Horizon: The longer your money is invested, the more time it has to grow.
Charges and Fees: Pension provider fees can erode returns.
Inflation: The purchasing power of your future income will be affected by inflation.
Taxation: Pension tax relief and taxes on withdrawal impact the net value.
Annuity Rates: If you plan to buy an annuity, prevailing rates at retirement are critical.
Disclaimer:
This calculator provides an estimation for informational purposes only. It does not constitute financial advice. Actual pension values and retirement outcomes can vary significantly due to market fluctuations, changes in personal circumstances, tax legislation, and other factors. It is highly recommended to consult with a qualified independent financial advisor for personalized retirement planning.
function calculatePensionValuation() {
var currentAge = parseFloat(document.getElementById("currentAge").value);
var retirementAge = parseFloat(document.getElementById("retirementAge").value);
var currentPensionPot = parseFloat(document.getElementById("currentPensionPot").value);
var annualContribution = parseFloat(document.getElementById("annualContribution").value);
var investmentGrowthRate = parseFloat(document.getElementById("investmentGrowthRate").value) / 100; // Convert to decimal
var lifeExpectancy = parseFloat(document.getElementById("lifeExpectancy").value);
var desiredAnnualPensionIncome = parseFloat(document.getElementById("annualPensionIncome").value);
var resultDiv = document.getElementById("result");
resultDiv.style.display = 'none'; // Hide previous result
// Input validation
if (isNaN(currentAge) || isNaN(retirementAge) || isNaN(currentPensionPot) || isNaN(annualContribution) || isNaN(investmentGrowthRate) || isNaN(lifeExpectancy) || isNaN(desiredAnnualPensionIncome)) {
resultDiv.innerHTML = "Please enter valid numbers for all fields.";
resultDiv.style.backgroundColor = '#dc3545'; // Error color
resultDiv.style.display = 'block';
return;
}
if (currentAge <= 0 || retirementAge <= 0 || currentPensionPot < 0 || annualContribution < 0 || investmentGrowthRate < -1 || lifeExpectancy <= 0 || desiredAnnualPensionIncome <= 0) {
resultDiv.innerHTML = "Please enter realistic positive values for inputs. Growth rate can be negative but not less than -100%.";
resultDiv.style.backgroundColor = '#dc3545'; // Error color
resultDiv.style.display = 'block';
return;
}
if (retirementAge <= currentAge) {
resultDiv.innerHTML = "Anticipated retirement age must be after current age.";
resultDiv.style.backgroundColor = '#dc3545'; // Error color
resultDiv.style.display = 'block';
return;
}
if (lifeExpectancy 0 && investmentGrowthRate !== 0) {
// Using the future value of an ordinary annuity formula
futureValueContributions = annualContribution * (Math.pow(1 + investmentGrowthRate, yearsToRetirement) – 1) / investmentGrowthRate;
} else if (annualContribution > 0 && investmentGrowthRate === 0) {
// If growth rate is 0, contributions simply add up
futureValueContributions = annualContribution * yearsToRetirement;
}
var totalFuturePensionPot = futureValueCurrentPot + futureValueContributions;
var estimatedYearsPotLasts = 0;
if (desiredAnnualPensionIncome > 0) {
estimatedYearsPotLasts = totalFuturePensionPot / desiredAnnualPensionIncome;
}
var formattedFutureValue = totalFuturePensionPot.toLocaleString('en-GB', { style: 'currency', currency: 'GBP' });
var formattedAnnualIncome = desiredAnnualPensionIncome.toLocaleString('en-GB', { style: 'currency', currency: 'GBP' });
resultDiv.innerHTML = `
Estimated Future Pension Pot Value: ${formattedFutureValue}
(Projected at retirement age ${retirementAge})Estimated Retirement Income Duration: ${estimatedYearsPotLasts.toFixed(1)} years
(Based on desired annual income of ${formattedAnnualIncome})
`;
resultDiv.style.backgroundColor = '#28a745'; // Success color
resultDiv.style.display = 'block';
}