The pension calculator is designed to provide contributors to the pension scheme with an indication of the amount of income they may receive in retirement.
By answering some simple questions, you will be able to see your potential retirement income and see how small changes can affect your retirement income.
Do note, however, that the pension calculator only provides you with an estimate of your pension fund and the income this could provide for your retirement. Thus, it will be helpful to treat figures from the pension calculator as a guide only because what you get is not guaranteed and you could get more or less than this.
As pointed out earlier, the pension calculator would help you to know how much you need to contribute to get your desired pension and based on your current contributions, how much will you be getting when you are retired.
On the rate of contribution to the pension scheme, the Pension Reform Act 2004 stipulates that the employer shall contribute a minimum of 7.5 per cent of employee's monthly emoluments while the employee shall also contribute a minimum of 7.5 per cent of his monthly emoluments to the pension scheme.
Based on what you get from your calculations, you can decide to make Additional Voluntary Contributions (AVC), if your current contribution does not meet your desired pension. The Additional Voluntary Contributions is provided for in section 9(5) of the Pension Act.
While determining how much you should contribute to get your dream Retirement Savings Account (RSA) balance, it is also equally important to calculate how much you can withdraw monthly and whether you can take a lump sum at retirement.
Thus, it is advisable to use pension calculator to estimate what your RSA would be, based on your monthly contributions over a period of time. It also calculates what maximum monthly withdrawal you could make, based on an estimated number of years after retirement.
It will equally be instructive to point out here that this pension calculator is based on certain assumptions and these include the fact that: pension contribution is constant over the period, the return on these contributions are constant over the period, a retirement pension plan is purchased with the total RSA amount upon retirement, the return on the investment remains the same as that over the period of contribution, no tax effect and that for payouts, the balances are reinvested monthly at same rates.
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