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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 15:46

Don't be a Donkey about your pension!

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.

4 comments so far. Why not have your say?

Micawber

Feb 24, 2016 at 16:26

"having enough to love comfortably" (last para) is an engaging typo that prompted a few minutes' enjoyable reverie, Gavin.

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Gavin Lumsden (Citywire)

Feb 24, 2016 at 16:30

Oops! Glad you like the diversion. Corrected now.

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Frank Frank

Feb 24, 2016 at 23:49

Useful, but obviously another marketing tool from the savings industry and more obviously Urquhart esq.

Is there any trick that industry, which I do not trust any further than I can throw, does not use?

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Trevor T

Feb 28, 2016 at 11:04

The danger of assuming an actuarial life span for pension purposes is that 50% of such people will run out of money before they die! Such is the nature of an 'average' life span.

If the 50% chance of running out of money is acceptable, that's fine, but those who would like more confidence in funding their old age need to assume a longer life than indicated by actuarial tables.

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