With age, a drop in earning potential makes people reevaluate their finances. To supplement their lifestyle, many set up pensions, which are essentially a way of saving for retirement. They can use their savings or investments for the future to ensure they have enough money to live comfortably after retirement. Here, tools called pension plans are rather popular, as they promise government tax relief, employer contributions, and a tax-free lump sum.

Types of pension
In the  UK , there are three types of pension: the State Pension, workplace pension, and private pension.

1. State Pension
This is the money the government pays when one reaches the required State Pension age. This amount can be built up by making National Insurance contributions throughout one’s life. That said, this amount alone is insufficient to sustain or live comfortably in retirement years. Another thing to note is that this pension is not paid automatically. Typically, one receives a letter two months before they reach State Pension age. This letter discusses the recipient’s eligibility for the scheme and details regarding the claim process.

2. Workplace pension
Many workplaces offer savings schemes to their employees to help them with retirement planning. In this scheme, one contributes a part of their salary to the pension fund. The employer also makes a contribution , the amount of which may be less than or equal to the personal contribution. The government adds to this fund by offering tax relief and helping the pension pot grow.

Workplace pension schemes may be divided into defined contributions and benefits (or final salary pension). The former is more popular, as here, the overall money depends on personal contributions and investment returns.

3. Private pension
Those who would like to have an additional source of income can also opt for private pensions, stakeholder pensions, or self-invested personal pensions (SIPPs ). Here, one needs to personally choose a pension provider, the contribution amount, and other details (including annual and lifetime limits). This is also supported by government tax relief policies. It is important to note that pension providers typically charge a fee in exchange for their services. One must account for this fee from the start, as it could significantly eat into their pension fund.

Tools for calculating pension amount
Payouts need to be calculated separately and then added for each of the pension types . For State Pension, the amount received depends on one’s National Insurance contribution history, i.e., the total number of qualifying years. Claims can only be made if one has at least ten qualifying years. To claim the full or maximum amount, one must have at least 35 qualifying years. Currently, this limit is set at £179.60 per week, with the State pension age being set at 66. That said, these numbers can change based on government discretion.

To know the total pension amount one will receive, one can check out the State Pension calculator. Those aware of how many years they have can simply calculate the pension amount by dividing £179.60 by 35 and multiplying it by the number of years they have made the National Insurance Contribution. For other types of pensions, one can use a third-party pension calculator.

1. Which?
With this pension calculator, users only need to fill out a short page of information first. Then, the tool directly shows the pension one can expect at retirement and the methods used to calculate the results. That said, the app does not take the State Pension into consideration . Additionally, the results are not dynamic, i.e., they cannot be tweaked to change or modify calculations.

2. MoneyHelper
This pension calculator begins by asking for one’s annual salary. Based on the input, it recommends a monthly aim to achieve the desired retirement account. Once the user enters additional information, the app also provides a table that displays the estimated annual income if one uses their pension pot to buy an annuity. This comprehensive calculation is dynamic and allows users to toggle between options to modify their retirement goals.

3. Aviva
Those looking for an easy-to-use tool to calculate their pensions can try Aviva. Its calculation starts with a short form and allows users to include or exclude State Pension amounts. In addition to regular calculations, it offers other estimates at the end, such as expectations with a drawdown, income from the annuity, tax-free lump sum payments, etc.

4. Hargreaves Lansdown
The Hargreaves pension calculator is a simple one meant for those looking for an app without annuity options or State Pension details. The app is also easy to use, starting its calculation by asking for details such as the date of birth, existing fund, targeted monthly income, gender, and whether one wants a tax-free sum. Using this information, the calculator creates a forecast to show how long the pension fund will last based on the average life expectancy and financial goals.

5. Unbiased
This app provides the target retirement income based on one’s current salary. Then, based on the entered data, it showcases how much one can draw down each year, with adjustable toggles for income, planned retirement age, and pension contributions. The app does not factor in aspects such as investment performance, State Pension, annuity, etc.