How to get a larger income in retirement
Choosing the Escalation Option will give you a larger income in retirement than if you choose to pay the same fixed contribution when you retire. The tables below show how the Escalation Option can potentially boost the value of your pension, shows a number of different monthly contributions and years to go into retirement and assumes 7% growth each year:
| Contribution at outset | Escalation Option? | Annual pension after 10 years’ contribution |
Annual pension after 20 years’ contribution |
Annual pension after 30 years’ contribution |
|---|---|---|---|---|
| £100 per month | With Escalation Option | £545 | £1,330 | £2,438 |
| Without Escalation Option | £482 | £1,045 | £1,736 | |
| £150 per month | With Escalation Option | £818 | £1,995 | £3,658 |
| Without Escalation Option | £723 | £1,567 | £2,604 |
| Contribution at outset | Escalation Option? | Annual pension after 10 years’ contribution |
Annual pension after 20 years’ contribution |
Annual pension after 30 years’ contribution |
|---|---|---|---|---|
| £100 per month | With Escalation Option | £593 | £1,581 | £3,145 |
| Without Escalation Option | £482 | £1,045 | £1,736 | |
| £150 per month | With Escalation Option | £890 | £2,371 | £4,717 |
| Without Escalation Option | £723 | £1,567 | £2,604 |
| Contribution at outset | Escalation Option? | Annual pension after 10 years’ contribution |
Annual pension after 20 years’ contribution |
Annual pension after 30 years’ contribution |
|---|---|---|---|---|
| £100 per month | With Escalation Option | £547 | £1,334 | £2,446 |
| Without Escalation Option | £483 | £1,048 | £1,742 | |
| £150 per month | With Escalation Option | £820 | £2,001 | £3,669 |
| Without Escalation Option | £725 | £1,571 | £2,612 |
| Contribution at outset | Escalation Option? | Annual pension after 10 years’ contribution |
Annual pension after 20 years’ contribution |
Annual pension after 30 years’ contribution |
|---|---|---|---|---|
| £100 per month | With Escalation Option | £595 | £1,586 | £3,155 |
| Without Escalation Option | £483 | £1,048 | £1,742 | |
| £150 per month | With Escalation Option | £892 | £2,378 | £4,733 |
| Without Escalation Option | £725 | £1,571 | £2,612 |
Notes to the Projections Tables
- We have assumed that in future the value of our investments will grow at 7% every year.
- We have assumed that you will buy a pension that increases each year in line with inflation.
- We have assumed that inflation (based on the Retail Prices Index) will be 2.5% each year.
- In calculating the cost of buying a pension, we have assumed an investment return after retirement of 0.2% every year in excess of inflation.
- We have assumed that you will buy a pension that provides for a spouse’s pension of half of your pension when you die and that, at retirement, you will be married to someone three years younger than yourself.
- We have assumed that you will choose to be paid monthly from the date of retirement.
- Tables show escalation options of 3% or 5%. However, you can choose a fixed percentage of between 1% and 10% or in line with Retail Prices Index (RPI).
- We have assumed that you do not take a lump sum at retirement. If you take a lump sum then your pension would be reduced.
Please note
What actually happens may vary considerably from these assumptions and so your future pension may be significantly different from the amounts shown.
