How the figures are calculated and the assumptions we have made


‘Picture This’ makes a number of assumptions about the income you might need in retirement and the estimated income you might get in retirement. It does not provide advice and the results should not be solely relied upon. We have assumed you are saving for retirement in a defined contribution plan (sometimes called‘money purchase’).

With this type of pension plan the value depends on a number of factors including:

  • when you start saving
  • how long you save for
  • how much you save
  • the charges taken
  • the return you get on your investments

As a result, the plan isn't guaranteed and can go down, which will give you a lower income in retirement.

‘Picture This’ takes no account of the different ways you can now take your retirements options, which is normally from age 55 onwards. If you need more information on these, please go to Pensions

All the numbers are rounded down to three significant figures.


Although we’re showing you the income you might have in the future, we’ve removed the effect of inflation – so £1 will buy the same amount as £1 today. We’ve assumed inflation will be a steady 2.5%.


Payments you make into your retirement savings plan – we have assumed you receive tax relief on your payments at the basic rate of income tax of 20%. This is taken into account in the estimated value of your retirement savings.

Estimated income you might receive at retirement by using the value of your retirement savings to buy an annuity – This income is taxable at your normal rate of income tax, but this is not taken into account as it depends on your personal circumstances.

More information on tax is available in the ‘A guide to pension tax’, which is available on your scheme website.

We've based this on our understanding of current UK law and HM Revenue and Customs practice as at September 2015. Bear in mind, any changes to these rules, or to your personal circumstances, could affect the benefits from your retirement savings.

Income you might need

This includes a figure for basic living costs based on the government’s minimum income calculator

  • Basic living costs are assumed to be £1,150 a month for a pensioner couple (excluding rent and childcare). This figure is based on the minimum income standard for the UK in 2015. The breakdown of figures is available in Table 1 at

Estimated costs for activities

The costs for each of the activities listed are, where appropriate, based on a general average from a range of similar activities sourced from the internet during August 2015. They do not take personal circumstances into account. Where you believe the costs for the activity are either too high or too low the tool gives you the opportunity to change the costs.

Estimated value of your retirement savings

Payments made into your retirement savings plan

  • The percentage of your salary paid into your retirement savings plan will remain fixed and continue until your entered retirement age.
  • We’ve assumed your salary will increase by 4.00% a year.
  • If your employer payments are linked to your age or length of service, then any future increases or decreases will not be reflected in your estimated retirement income.

Income or cash lump sums you add

  • Tax has not been deducted from any amount you enter.
  • Any cash lump sums added are assumed to grow at 1.00% a year.


Is calculated assuming payments in a hypothetical lifestyle fund* where the projected growth rate varies with length of time to retirement. 

Investments are assumed to grow as follows:

  • Up to 4 years from retirement at 5.00% a year
  • 2-4 years from retirement at 4.50% a year
  • 0-2 years from retirement at 4.00% a year

We’ve assumed the fund has a charge of 0.75%.

*A lifestyle fund automatically switches your investments.

When you are far away from retirement, your money is mostly held in investments which have greater potential for growth but also greater risk for falls in value (for example, shares). As you move towards retirement, over time your money is moved into investments which have lower growth potential but are less likely to have wide fluctuations in value (for example, gilts). This is to help reduce the chance of your retirement savings suffering large falls in value shortly before retirement although this is not guaranteed.

Estimated income you might receive

The estimated taxable income for life is provided by using the value of your retirement savings plan to buy an annuity at your entered retirement age. The amount of annuity income you get depends on a variety of factors including the options you choose and annuity rates at the time you buy an annuity. We have assumed the following:

  • You are a healthy non-smoker
  • No tax-free cash is taken when you buy an annuity
  • An interest rate of 2.3% a year
  • A single life annuity is purchased and will not increase with inflation
  • The single life annuity has a five year guarantee period. This means the annuity will pay out over this guaranteed period if you die.  However, if you die after the guarantee period ends, the annuity will stop paying.
  • Income is calculated before tax is deducted. In most cases, you will have to pay tax on your income at your marginal rate.

The estimated income you might receive does not automatically include:

  • the state pension – unless you’ve added it into the ‘Add other savings’ section.
  • any income you receive from a defined benefit pension (or final salary) unless you’ve added it into the  ‘Add other savings’ section.
  • your partner’s expected income in retirement.

If you take you retirement benefits differently to those assumed above this will impact on the amount of income you will receive.