Citywire printed articles sponsored by:
View the article online at http://citywire.co.uk/money/article/a884618
Don't be a Donkey about your pension!
Gaming experts who worked on Donkey King video game have produced an app to show how much money you need for your retirement.
by Gavin Lumsden on Feb 24, 2016 at 15:46Follow @FundFanatic
Eight in 10 people don’t have a clue about how much they need to save for retirement so investment group Seven has revamped their app to help them find their 'Number'.
A ‘MyFuture’ tool has been added to the 7Imagine app. It was built by gaming experts who worked on the video games Donkey Kong and Golden Eye and combines sophisticated modelling with an easy-to-use layout.
Justin Urquhart-Stewart, co-founder of Seven Investment Management (7IM), said the designers were former clients of the company who said: ‘We like what you do but you could communicate it better!’
He added: ‘There are a lot of simple online retirement calculators out there. This tool is more complex because we want to capture and present a more detailed picture.’
After entering details of their pension savings, earnings and spending expectations the app shows what size of a pension pot that could produce. It is available from Apple's app store and Google.
Crucially, 'MyFuture' reveals how long the money might last, which can be a cue for people revising their assumptions, such as saving more or working for longer, in order to improve the result.
7IM chief executive Tom Sheridan commented: ‘It’s frightening, the biggest factor putting people off investing into a pension is not appreciating just how much they need.’
A survey of 2,000 people conducted for 7IM revealed £23,400 as the average annual income considered to be necessary for an individual to retire in comfort. Given the maximum state pension is just over £6,000 a year that required sufficient savings to generate £17,400 a year.
Using a ‘rule of thumb’ calculation 7IM multiplied the £17,400 by 20 to arrive at £348,000 as the pension pot the person would need.
It’s a lot of money but provided it was invested and grew by an average of 3% a year 7IM say it would be enough to last nearly 30 years.
However, Sheridan warned: ‘If you did only save half your necessary target but carried on taking out £17,400 a year you would run out of money within 12 years.’
That would be bad news as on average a man reaching 65 now will live for another 18 years, while women can expect another 21 years.
Urquhart-Stewart said the figures should encourage people to invest. Although stock markets were turbulent at the moment, he said anyone with a long-term retirement goal could afford to sit through the volatility and see their money grow faster than cash.
‘Someone saving £200 a month for 40 years and generating a 1% cash-like return above inflation will have a pension pot of £117,000. If they achieve 5% above inflation they’ll have £290,000,' he said.
'That could be the difference between having to pop your clogs in your seventh year of retirement or having enough to live comfortably for just over 22 years,’ said Urquhart-Stewart.
More about this:
More from us
- How much should you take from your pension each year?
- Should young people save for their pension or a home?
- Would you save 10% of your wages for a tax-free pension?
- How a 'robot' at work could help with your pension
- How much do The Young Ones of today need to save?
- Pension Awareness Day: why the young need to save now
- What you need to save into your pension in 2014
- Why don't you save into a pension?
- Thanks Dad! for starting me on my first pension
- Pensions guide from The Lolly
- Could you live on the national minimum wage in retirement?
- Why you have to save and shouldn't rely on the state pension
- How much should I save for my pension?
Weekly email from The Lolly
Get simple, easy ways to make more from your money. Just enter your email address below
An error occured while subscribing your email. Please try again later.
Thank you for registering for your weekly newsletter from The Lolly.
Keep an eye out for us in your inbox, and please add email@example.com to your safe senders list so we don't get junked.
Latest from Investment Basics
by Gavin Lumsden on Sep 30, 2016 at 17:23