The graph will show a line moving upwards and peaking at your planned retirement age, then moving down again after this. This line represents the estimated value of your pension pot, with the peak showing the amount you are estimated to have in your pot at retirement. There should be a box to the right of this that tells you this amount, as well as the age your pot will last you until, based on your desired retirement income.
You will see a shaded area around the line. This is used to show the range of outcomes for the size of your pot, depending on how it performs. The line in the middle assumes that the underlying investments in your pension grow at an average rate of 5% per year. However, the upper limit of the shaded area shows the value of your pension if it grows by an average rate of 8% per year, and the lower limit shows an average of 3% per year. However, no-one can say with absolute certainty how your pension will perform, so it’s good to be aware of several potential outcomes. Our article Where is my pension invested? explains more about where your pension savings go.
You are able to complete additional fields to help make your graph more accurate. For example, if you expect to have other forms of income after retirement, you can fill in the field marked “Additional earnings post retirement (per year)”, and if you are expecting any one-off lump sums that you plan to invest into your pot, you can add these to “One off contribution (before tax relief)”.
Additionally, there will be buttons that you can use to state whether you wish your State Pension to be included in the calculations, and whether you are planning to take 25% of your pension tax-free. Doing the former will increase your pension pot, whereas doing the latter will decrease it. Read our articles How the State Pension works and Should I take my tax-free pension cash at 55? to learn more about these options.
Underneath the graph, there will be another section comparing how much you’ll receive if you take an income from your pension, buy an annuity or take your entire pot as cash. The first box will restate your desired annual income and the age your pot will last until if you draw an income from your pension, also known as pension drawdown. Read more in our article What is pension drawdown and how does it work? The second box will show you how much guaranteed annual income you would receive for the rest of your life (before tax) if you were to buy an annuity instead. Read more about annuities in our article Annuities explained.
The final box will show how much you will get if you take your pension as a cash lump sum – this amount will be significantly lower than the value of your pot, due to the amount you’ll have to pay as tax (also shown). Our article Your pension options at retirement provides a full rundown of your pension options when you retire.