Pay a little more
If you decide to pay a little more, even a small increase in contributions can make a big difference in your pension at retirement.
In thinking about how much to pay, it’s important to recognise the difference that a small increase in your contributions today can make to the pension you might receive.
The table shows projected fund values for members who start saving at different ages, contributing either 5% or 8%. You can see the different fund values they may receive.
The power of saving 3% more
| Age member starts saving
|
Member contributes 5% of salary each year
|
Member contributes 8% of salary each year
|
|
|
Projected fund at retirement |
Projected fund at retirement
|
| 25 |
£1,310,200 |
£1,772,600 |
| 30 |
£1,082,700 |
£1,464,800 |
| 35 |
£886,600 |
£1,199,400 |
| 40 |
£716,400 |
£969,100 |
The Company's Match Plus contributions mean that your decision to pay in 3% more can make a significant difference to how much is paid into your Retirement Account.
Contributions above 8% will not receive more than the maximum Match Plus contribution from the Company (15%) and so the difference that paying more above this threshold will make is less marked than the illustration above.
These figures shown are not adjusted for inflation (in nominal terms).
| Age member starts saving
|
Member contributes 5% of salary each year
|
Member contributes 8% of salary each year
|
|
|
Projected fund at retirement |
Projected fund at retirement
|
| 25 |
£453,100 |
£613,000 |
| 30 |
£374,500 |
£506,700 |
| 35 |
£307,000 |
£415,300 |
| 40 |
£247,700 |
£335,100 |
These figures have been produced by Schroders to assist FuturePlanner with its communications. They show the possible benefits of saving more towards retirement. A small increase in contributions will lead to a greater fund, and therefore pension, at retirement.
The figures are based on the following assumptions:
- The member has a salary of £30,000 when they start saving. Their salary increases at a rate of 3.5% each year until retirement at age 68.
- When a member contributes 5% of their salary, the employer contributes an additional 12%. When a member contributes 8% of their salary, the employer contributes an additional 15%.
- The fund is invested entirely in the default lifestyle arrangement. Funds grow in line with the target investment returns of the default strategy each year. Actual investment returns may be higher or lower than this and will also depend on how the member's fund is actually invested. The pattern of investment returns also has an important influence on the accumulated fund.
- Investment charges applied to the member's fund are applied in line with those charged for the default investment strategy. The growth figures above are shown gross of these fees. Actual investment charges will depend on how the member's fund is invested and may differ from this. The pattern of investment returns also has an important influence on the accumulated funds.
- It is assumed that the rate of future inflation is 2.5% each year, just above the current long-term inflation target set by the Bank of England (this figure has been used to express projected funds at retirement in ‘today's money’). The actual inflation rate in future years may be higher or lower than this.