Calculate the size of fund you need for retirement
In step 1 we looked at setting a retirement date and estimating the amount of income you will need. We now need to estimate the size of fund required to produce this amount.
A ball park figure can be derived using standard annuity rates. For example, if you were to retire now, at age 65, a pot of £100k would buy you approximately £3200 per annum (increasing at 3% per year). You can see that to provide a reasonable level of income you need a substantial pension pot.
A financial adviser will use a cashflow modelling tool to more accurately predict the size of fund required, based on your investment preferences and retirement options.
Next time we will start making a plan to grow your pension pot to the size it needs to be.