E.R.I.C. Ask E.R.I.C.

Initial Inputs

50

Please provide the current value of your pension fund and ISA. If you have multiple funds, please provide a combined value.

0
£
65
65

The calculator assumes that you and your partner retire at the same time.

Choose the end age of your retirement projection. You can view the average life expectancy for someone of your age using this calculator.

99

Choose additional options as required:

50

If you are unsure of the level of income you will require in retirement, you can select a standard of living based on the widely recognised Retirement Living Standards:

Alternatively, specify your target retirement income using the slider:

0
0

You can specify a target for different categories of spending using the budget calculator:

Budget Calculator

0
0

If you have a final salary or career average pension, enter the annual pension you are entitled to start receiving at your scheme's Normal Pension Age. If you are an active member still accruing benefits, provide the projected benefits figure here.

65
£

If you will receive a tax free lump sum, add the amount of it that you intend to invest for retirement income below.

£

0
75

The amount of your State Pension below assumes you will be entitled to the full amount. If this might not be the case due to gaps in your national insurance record, find out what your actual entitlement is at www.gov.uk and then update the value below.

If you are already retired, below State Pension age, and do not expect a full State Pension, consider whether purchasing missing National Insurance years could improve your entitlement using the NI Top-Up Contribution Calculator.

£

Defined Benefit Pension

Contribution Increases

You may wish to increase your pension contributions in the future, for example after paying off a mortgage. Set your additional monthly contribution below along with the age to start at.

55
£0

You may wish to increase your ISA contributions in the future, for example after receiving a pay rise or finishing other financial commitments.

55

The amount to increase by should be specified in today's money terms.

Assumptions

Select an FCA Growth Scenario - These three scenarios are those specified by the Financial Conduct Authority for use in pension illustrations.

i
7%
7%
2.5%

See the effect on your retirement age from fund charges at three different levels, or use the sliders to set specific values. If you are planning to consolidate your pension funds in one place, use the level of charges expected for the destination provider.

1%
1%

Withdrawal Strategy

Select the age at which to start receiving your annual pension and to receive any tax free lump sum.

Provide the benefits you have already accrued, valued at your scheme's normal pension age (NPA), assuming you left service immediately.

£
£

Please also provide the number of years of service you have already accrued. This is required for the active-member approximation.

0
65
Defined Benefit Pension Amount
Reduced Tax Free Lump Sum

Temporarily increase your target income for a fixed period in retirement.

70
0%
0

You can afford more income early in retirement if you specify a reduction in income later in retirement. Indicate the age at which you want a reduction below, along with the percentage reduction. You can specify a second reduction at a later age.

60
0%
65
0%

You can model the impact of deferring your State Pension. If your selected retirement age is after your State Pension age, deferral to retirement is applied automatically. Each deferred year increases annual State Pension payments by 5.8%, on top of the normal yearly increase (inflation or 2.5%, whichever is higher).

0

Enter a minimum balance cushion for your ISA throughout your retirement.

£

Risk Management

Stress-test your retirement income by simulating a market crash. Select the age at which it occurs, the percentage fall and the recovery period, then tick the box to apply the scenario. Set the maximum tolerable reduction in retirement income to demonstrate your level of resilience to the impact of the crash.

60
0%
2
0%

Choose fixed pension fund and ISA buffers to hold in cash or short term bonds, then choose the percentage of the remaining pension fund and ISA balances (above each buffer) to hold in cash or short term bonds. Holding more in these safe assets reduces market crash impact, but lowers expected long-term growth and therefore the level of affordable income.

£
0%
£
0%
3.5%

The weighted average growth rate for this asset mix is 0.0%. The asset mix in your funds is rebalanced each year to maintain these buffers and percentages for the whole projection.

In purchasing an annuity you exchange some or all of your pension fund for a guaranteed income for life. This removes the risk associated with a market crash and the risk that you run out of funds in later life. But in exchange for the certainty, your affordable income will be lower.

To calibrate the annuity rate calculator to rates currently available in the market and to your specific circumstances, use the Annuity Rate Calibration Tool.

65
0%

Select the level of increases:

Tax Optimisation

If you wish to take a tax-free lump sum out of your fund at retirement, please enter the percentage of your fund you would like to withdraw. The maximum is 25%.

0%

Choose to divert your existing pension contributions to your ISA for additional flexibility or divert your ISA contributions to your pension for additional tax relief.

Select the percentage of salary to switch from pension contributions to take-home pay and add to your ISA.

0%

Divert your ISA contributions into your pension to boost tax relief.

0%

Using ISA withdrawals to avoid paying higher rate tax can reduce your overall future tax bill. Use the slider below to set the percentage of the basic rate band to fill up with payments from your pension fund.

50

To observe how different strategies impact your Total Retirement Tax Rate, select a tax chart and watch the Key Figures change as you adjust the slider.

Note that the optimum income mix depends on the assumptions made about future investment returns and inflation.

Use this section to estimate how inheritance tax could affect your estate over time. Select the Fund Values Chart to view the results. Inheritance Tax is charged at 40% on the value of your estate above £325,000, with an additional £175,000 allowance if you pass your home to direct descendants (subject to tapering for estates over £2 million). It is assumed these allowances are fixed until at least 2030.

The red area on the chart shows where inheritance tax liability exceeds liquid assets that can be used to pay the inheritance tax bill, indicating that the family home will have to be sold to pay the bill. Use the Minimum ISA Balance feature above to fund your inheritance tax liability and see the lower income you can afford if you want to avoid the sale of the home.

£
£
3%
0

Regulatory Change Scenarios

See the effect on your affordable retirement age if the state pension age increases. Select a new state pension age then tick the box to update the results.

67

Tax bands are currently frozen until 2031, dragging more people into higher rate bands as earnings rise. Investigate the effect on your retirement income if the freeze is extended beyond this point. Enter the number of additional years to freeze the tax bands.

0

Explore the potential impact of a future reduction in the 25% tax-free lump sum entitlement. Use the slider to adjust the maximum tax-free percentage available on retirement.

25%

Explore the effect of a reduction in the current £268,275 tax-free lump sum lifetime limit. Use the box below to enter the limit.

£

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Your Affordable Retirment Age:

years months
Age Gross State Pension

i 		Gross Defined Benefit Pension

i 		Gross Annuity Payments

i 		Gross Pension Fund Income

i 		Gross Other Income

i 		Net State Pension

i 		Net Defined Benefit Pension

i 		Net Annuity Payments

i 		Net Pension Fund Income

i 		Total Tax Paid

i 		Net Other Income

i 		ISA Withdrawals

i 		Total Net Income

i

0
£

0

If your partner has a final salary or career average pension, enter the annual pension they are entitled to start receiving at their scheme's Normal Pension Age. If they are an active member still accruing benefits, provide the projected benefits figure here.

65
£

If your partner will receive a tax free lump sum, add the amount of it that you intend to invest for retirement income below.

£

0

0
75

The amount of your partner's State Pension below assumes they will be entitled to the full amount. If this might not be the case due to gaps in their national insurance record, find out what their actual entitlement is at www.gov.uk and then update the value below.

£

Defined Benefit Pension

Contribution Increases

55
£0

You may wish for your partner to increase their ISA contributions in the future, for example after settling other financial commitments.

55

The amount to increase by should be specified in today's money terms.

£0

Withdrawal Strategy

Select the age at which your partner should start receiving their annual pension and to receive any tax free lump sum.

Provide the benefits your partner has already accrued, valued at their scheme's normal pension age (NPA), assuming they left service immediately.

£
£

Please also provide the number of years of service your partner has already accrued. This is required for the active-member approximation.

0
65
Defined Benefit Pension Amount
Reduced Tax Free Lump Sum

Temporarily increase your partner's target income for a fixed period in retirement.

70
0%
0

You can model the impact of deferring your partner's State Pension. If your partner's selected retirement age is after their State Pension age, deferral to retirement is applied automatically. Each deferred year increases annual State Pension payments by 5.8%, on top of the normal yearly increase (inflation or 2.5%, whichever is higher).

0

Your partner may wish to maintain a minimum balance cushion in their ISA throughout retirement.

£

Risk Management

Lock in guaranteed income for your partner by converting some (or all) of their pension fund into an annuity.

To calibrate the annuity rate calculator to rates currently available in the market and to your specific circumstances, use the Annuity Rate Calibration Tool.

65
0%

Select the level of increases:

Tax Efficiency

If your partner wishes to take a tax-free lump sum out of their fund at retirement, please enter the percentage of their fund they would like to withdraw.

0%

Choose to divert your partner's existing pension contributions to their ISA for additional flexibility or divert their ISA contributions to their pension for additional tax relief.

Select the percentage of salary to switch from pension contributions to take-home pay and add to your partner's ISA.

0%

Divert your partner's ISA contributions into their pension to boost tax relief.

0%

Using ISA withdrawals to avoid paying higher rate tax can reduce your partner's overall future tax bill. Use the slider below to set the percentage of the basic rate band to fill up with payments from your partner's pension fund.

50

To observe how different strategies impact your partner's Total Retirement Tax Rate, select a tax chart and watch the Key Figures change as you adjust the slider.

Note that the optimum income mix depends on the assumptions made about future investment returns and inflation.