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Assumptions

Disclaimer and assumptions

Target setting tool

Disclaimer

This tool should be used to assist your wider retirement planning but should not be your only source of information when planning for retirement. As the figures used to create the target income for each retirement lifestyle are not tailored to your individual circumstances, the target incomes will not necessarily reflect an accurate target for your needs.

This tool does not guarantee any income in retirement, and your expenditure in retirement will most likely differ from the values used throughout the tool.

Lifestyles

The following annual target incomes are used within the tool:

Target lifestyle Annual target income
Basic £15,121
Comfortable £21,821
Luxury £27,139

Data used

The figures used to estimate the different target incomes in retirement have been based on the Office for National Statistics’ (ONS) ‘Components of household expenditure’ report (UK, financial year ending 2018). This reports the average spending for households in the UK across different categories as shown within the tool.

The tool uses the average spending reported for a household to give a target income for a ‘Luxury’ lifestyle for a single pensioner.

To give the ‘Comfortable’ target income, the ‘Luxury’ target income has been reduced by 20%.

To give the ‘Basic’ target income, the ‘Luxury’ target income has been reduced by 40%.

Additional notes (brackets denote ONS report ref.)

Food and drink

Doesn’t include alcoholic drinks, tobacco or narcotics.

Clothing and footwear

Includes clothing and footwear spending across all age and gender groups, accessories, haberdashery, clothing materials, clothing hire, dry cleaners, laundry and dyeing.

Bills

Includes rent, housing 'other expenditure items’ (13.1+13.2) minus holiday (13.3)

Household goods/services

Includes cleaning materials and domestic services

Personal goods/services

Includes hospital services, opticians/glasses, non-optical appliances and equipment, postal services, telephone equipment and services, internet subscription, personal care, personal effects, social protection, insurance, and other services

Transport

Includes vehicle purchase, maintenance/servicing, and public transport

Social

Includes audio-visual, photographic and information processing equipment, other major durables for recreation and culture, other recreational items and equipment, gardens and pets, recreational and cultural services, newspapers, books and stationery. Doesn't include holidays or holiday accommodation

Holidays

‘Basic’ includes holidays in the UK only. This includes: package holidays (9.6.1), accommodation (11.2.1), development of photos (9.4.5).

‘Comfortable’ includes holidays abroad only. This includes: package holidays (9.6.2), accommodation (11.2.2), holiday spending (13.3), development of photos (9.4.5).

‘Luxury’ includes the figure for both UK and abroad.

Omissions

The tool assumes that you will not put any income towards education.

ONS report assumptions and calculations

The report uses the mean when referring to averages unless stated otherwise. Therefore, total average weekly household expenditure is equal to the total weekly expenditure of households divided by the number of households. All spending estimates are rounded to the nearest £0.10 therefore the sum of component items does not necessarily add to the totals shown.

Spending is presented using Classification of individual consumption by purpose (COICOP) categories, unless otherwise stated. COICOP is an internationally recognised classification system consistent with that used by UK National Accounts. It does not include all types of payments; for example, capital mortgage repayments are excluded.

On track calculator

Terms and conditions

This modeller has been designed to show you whether you are on track to reach your retirement target.

Please remember that the results shown by the modeller are for illustrative purposes only and do not guarantee any future outcome or entitlement. The results should not be relied upon for retirement planning. Your actual benefits in retirement are likely to differ from the estimated figures shown and could be lower.

Any choices you make or data you enter while using the modeller are erased when you close your browser.

There are a number of limitations to the modeller – to view these please see the assumptions below.

The results provided by the modeller do not constitute a Statutory Money Purchase Illustration (SMPI) projection. The default assumptions used are not necessarily appropriate for your specific circumstances.

You may wish to seek independent financial advice before making a decision about your future pension provision. A list of independent financial advisers can be obtained from www.unbiased.co.uk.

In certain circumstances, the assumptions used in the calculator may be different from those used in your pension statement and therefore the projected values may be different.

Basis of calculations

The modeller bases its calculations upon the data input and the factors detailed in the ‘assumptions' section. Your pension figures assume that you continue to be an active member until the retirement age you have selected. If you leave or retire before this, your estimated benefits may be lower. The modeller also provides an indication of the effect that changing your contribution rate and retirement age could have on your estimated RSP retirement benefits.

The modeller makes allowance for your estimated benefits accrued within IMI only. No allowance is made for any benefits that you may have in any other pension arrangements.

State Pension

State Pension estimates are included within the projection and are based on receipt of the full amount - £8,767.20 a year (as at August 2018). Depending on the number of qualifying years of National Insurance contributions you have, you may receive less than the amount quoted. To obtain a personal estimate of your State Pension, visit www.gov.uk/check-state-pension.

Today’s terms

The modeller shows all of the results in today’s prices, by discounting back the future projections to the present using the inflation assumption of 2.5%.

Taxation

Your retirement benefits are subject to Fund and HM Revenue & Customs (HMRC) rules in place at that time. This modeller cannot take account of any future changes to the legislation. Retirement benefits, whether from IMI or any other source, in excess of the Lifetime Allowance (LTA) will be subject to additional tax. No allowance has been made for any such breaches within this modeller.

The Annual Allowance is the maximum increase in pension savings you can build up in any one tax year, whether in IMI or any other approved pension arrangement, without incurring an additional tax charge. No allowance has been made for any such breaches within this modeller.

Inputs

You can find the inputs for the tool in your recent pension statement. The modeller bases its calculations on these inputs. If you use the QR code to access the modeller then it will be pre-populated with information from your pension statement.

Assumptions

Price inflation

A fixed inflation rate of 2.5% a year from the current date until you retire.

Salary

To estimate your future contributions to your RSP account, we assume that your salary will increase at the rate of 2.5% a year each January. Salary is assumed to be the same throughout the year and does not account for any gaps in employment (e.g. maternity leave).

Retirement age

If you use the QR code to access the modeller, the retirement age in the modeller will default to your selected Target Retirement Age. If you input your details manually, your retirement age will default to your State Pension age based on your date of birth. You can manually change your retirement age on the results screen. The modeller only allows you to select a retirement age between 55 and 75. The current Normal Retirement Age is 65.

Modeller rates and allowances in use

The following UK (excluding Scotland) rates and allowances have been used to calculate the figures in the modeller and assume you have the standard personal allowance:

Further information on the calculation of National Insurance contributions can be found on www.gov.uk/national-insurance

We have assumed you are a UK taxpayer (excluding Scotland). If you are a Scottish taxpayer, different rates/allowances may apply to you.

Contributions

The modeller allows you to see the impact of increasing your contribution rate. The modeller only allows for the standard matching contributions made by IMI (maximum matching of 6%). If you have a non-standard matching structure this will not be taken into account and therefore the effect of increasing your contribution rate may be different to that shown.

Investment returns

Your RSP account is invested to help it grow. The amount it grows will depend on where you choose to invest.

If you use the QR code the investment rate used in the modeller will be the same as stated on your full pension statement.

If you enter your details manually, the modeller will assume that you are invested in the RSP ‘Stay Invested’ Lifecyle fund. A different rate of return will be applied based on how many years you are away from retirement.

The returns on investments are uncertain and there is no guarantee that your RSP account will provide this return. Actual performance will vary considerably.

Cash lump sum

Your DC and DB pension elements are treated as separate schemes for the purpose of calculating a tax-free cash lump sum.

In the modeller, tax-free cash is taken directly from your DC account until 25% of the account value has been reached, and is then taken from the value of your DB pension where applicable (using a table of commutation factors) until 25% of the value of your DB pension has also been used. You cannot model your cash lump sum beyond this tax-free amount.

Pension income from RSP account

The annuity rates used within the modeller are based on:

IMI 2014 Deferred Fund

If you input an IMI 2014 Deferred Fund pension this will be displayed on the modeller as payable from your Target Retirement Age or your State Pension age (see Retirement Age above). The modeller uses age 65 as the NRA for your IMI 2014 Deferred Fund. If you select a retirement age that is earlier or later than age 65, your IMI 2014 Deferred Fund pension will be reduced for early retirement or increased for late retirement using a table of appropriate factors.

Cost calculator

Disclaimer

This modeller has been designed to show you the cost of making contributions, when taking tax and National Insurance into account.

Please remember that the results shown by the modeller are for illustrative purposes only and your actual contributions may differ depending on:

The results in the modeller do not guarantee any future outcome or entitlement. The results should not be relied upon for retirement planning.

Any choices you make or data you enter while using the modeller are erased when you close your browser.

There are a number of limitations to the modeller – to view these please see the assumptions below.

You may wish to seek independent financial advice before making a decision about your future pension provision. A list of independent financial advisers can be obtained from www.unbiased.co.uk.

Assumptions

Taxation and allowances

The following UK (excluding Scotland) rates and allowances have been used to calculate the figures in the modeller and assume you have the standard personal allowance:

Your retirement benefits are subject to Fund and HM Revenue & Customs (HMRC) rules in place at that time. This modeller cannot take account of any future changes to the legislation. Retirement benefits, whether from IMI or any other source, in excess of the Lifetime Allowance (LTA) will be subject to additional tax. No allowance has been made for any such breaches within this modeller.

The Annual Allowance is the maximum increase in pension savings you can build up in any one tax year, whether in IMI or any other approved pension arrangement, without incurring an additional tax charge. No allowance has been made for any such breaches within this modeller.

SmartPay

The modeller assumes that you contribute through SmartPay.

Contributions

The modeller allows you to see the impact of increasing your contribution rate. The modeller only allows for the standard matching contributions made by IMI (maximum matching of 6%). If you have a non-standard matching structure this will not be taken into account and therefore the effect of increasing your contribution rate may be different to that shown.

Payslip graphic

The payslip graphic is formatted in a similar way to your official IMI payslip for illustrative purposes only. The figures contained within this will differ from your actual payslip, and may not be entirely accurate for your circumstances. If you have other Company benefits which are tax-deductible and/or that you contribute to through a salary sacrifice arrangement, these are not shown, which would alter your final tax/NI deduction. Other assumptions used throughout the modeller also apply for this graphic.

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