How do I calculate interest owed on a pension?

[BettyButterknife]

Complicated, but basically I started working for my current employer in June 2011. My contract stated there was a company pension into which my employer would contribute 5% of my gross salary, and I was able to match this.

Turns out there's no company pension scheme. Now, my manager has said I can set up my own scheme and that they will put in the equivalent ££ that would've gone in had there been a company scheme.

However, the figure he's given me is the basic % without any compound interest added. I think I should be entitled to that interest, otherwise I'm losing out (and they are still in breach of contract).

But how do I calculate that interest? What is a ballpark pension interest rate?

There is no ballpark figure for pensions. As an investment rather than a cash deposit the value can just as easily go down as well as up. You could argue for an inflationary percent or two but I wouldn't bt too optimistic

Pension providers currently use an annual growth rate of 7% to give you projections so it could be argued this would be fair. However most pension funds have in fact done pretty well over this period so you could argue an even higher sum (look at the information available from the fund you have chosen, or ask them to calculate it exactly).

However it is likely that your employer won't have benefited by this much, so he might argue a lower rate - say inflation at c.3%.

If he pays you in March 2013 to catch up with 22 equal payments from June 11 to March 13 the aggregate interest at 7% APR would be 6.17% of the total payment and at 3% APR 2.63% of the total payment. The formula used to derive this is here.

But why not aim high - instead of 5% of your salary over the period, ask for 6% - it doesn't sound like a big difference but represents a growth rate of 22% APR!

The IFA that sets up your pension can help you. Take the movement of the funds you actually select over the period you should have had the payment. The company that you place your business with could backdate the calculation for you. We do these calculations when there has been a failure to carry out an instruction, so basically the situation you are talking about.