Pension and compounded interest

[ThisGirlCantAlways]

Wonder if anyone can help, just trying to get my head round my pension.

Im 52, pension pot £160,000
Say i work until 67 and firm and I jointly pay in £10,000 per year for next 15 years.

How do I roughly guess has much my pot could be worth with compounded interest etc?

Then I think I’ll draw down an amount each year.

I know this is all really dependent on health.

Depends how it is invested and what amount of investment growth / inflation you expect. Invested in equities returning 4 per cent real for example gives a dramatically different answer to investment in cash.

It’s a work pension with standard life….

You could enter figures into a compound interest calculator online but a pension will be different to compound interest...you also have to consider inflation as that would erode value.

Oh gosh I’m confused than when I started 😁

Pensions don't really get compound interest in that way. They're usually mostly invested in the stock market so grow with that. Your annual statement will model various growth scenarios.

The name of the pension company doesn't give any information about what it's invested in.

If you start with 160k and assume it increases by 5% a year for 15 years (£332k) then add:
Year 1: +10k which will increase by 5% a year for 15 years (£20,790)
plus
Year 2: +£10k which will increase by 5% a year for 14 years (£19,800) … and so on you get about £550k in 15 years time.
Whether 5% is a reasonable expected return will depend on where it’s invested etc. But it’s a guide!

Don’t forget It can also decrease. My basic pot is still down on its initial value 6 years ago. (Fair to say it’s frozen as I have a new employer pension).

@Justbetweenus thank you, i understand that, I might take a look at 3% increases…

Standard Life has a login to a portal and a calculator where you can model different scenarios. I have a work pension with them from the last four years and the return has been dreadful, virtually nothing.

search compound interest calculator on google. You can plug in the initial investment, the ongoing investments, an assumption on annual return (4-5%) and for how many years and it will calculate it all for you

£160k now with £10k a year added for 15 years at 4% avg annual return you could be just under £0.5m.

@NoBinturongsHereMate wher do you mean compound internet doesn’t work that way with pensions? What do you think Warren Buffet keeps banging on about.

the annual internet isn’t guaranteed obviously. But a reasonable estimate would be 6-7% annual growth. Of course this could all go tits up - but that’s a risk. The compound interest calculation works out what the benefit is for that tow balance against

OP googlenxompound internet calculator

wher do you mean compound internet doesn’t work that way with pensions?

The point is it's not interest (usually - although that depends what you're invested in). It's non-linear, and can go below as well as above the original figure.

Growth does compound, on average, so yes a compound interest calculator will allow you to model various scenarios - but they are predictions of average growth, not definite calculations.

@NoBinturongsHereMate well obviously it’s a prediction. It’s a calculation of a possible outcome depending on assumptions.

nothing will give you a definite future financial calculation.