How to forecast pension value?

A question about : How to forecast pension value?

I have a slight query on how to forecast the pension pot value, the calculators don't seem fit my pension scheme and i think the scheme itself forecasts in the same way as the calculators.

Basically the scheme has age related contribution increases that I don't believe it factors into the forecast:

Age = Employees/Employers
32/33 = 2%/6%
34 = 3%/8%
35/37 = 4%/10%
38/39 = 4.5%/11%
40/49 = 5%/12%
50+ = 6%/14%

Pension pot is currently Ј76k, age 32, salary Ј46k
Using the forecast tool at 57 it estimates a pension value of Ј286k, it doesn't show what growth rate it is using, but if I model it in excel I get 3% growth with no increasing contributions and land at the Ј286k

If I apply the scaling contribution increases in my excel model the pension pot increases to Ј420k, and if I adjust the growth to 5% which is a figure I think should be more achievable it goes to Ј585k

Does it sound like my excel model is working reasonably well? I would be concerned if the pension pot is Ј286k and would want to take action now to improve it but I feel the forecast on the tool is giving me duff info.

I haven't allowed for salary increases or inflation in anyway.

Best answers:

• You appear to have allowed for inflation to some extent because the long term historic growth rate for the UK stock market has been about 5% plus inflation.
  Your numbers seem reasonable, though I suggest that you add a 50% safety margin to your target pot size just in case you suffer form a sustained period of bad market conditions around retirement time. Or, alternatively, accept the corresponding 33% reduction in potential income in that situation. Most of us can accept some reduction in relatively unlikely circumstances to avoid overshooting greatly in more normal conditions.
• The age related increases sound very similar to my pension scheme. Don't suppose the forecast tool is from Towers Watson?
  On mine, the forecast tool is is real terms so it shows the fund value after making an assumption for future inflation. You'd expect a net rate of 2.5-3% if it's doing that, as you found when you tried to replicate the results. Using 5-6% gives you an outcome without inflation taken into account.
  The advantage of taking inflation into account is that when you look at the income that could be taken from the projected pot, it's directly comparable with your income today.
• Thanks for the responses.
  Yes the forecast tool is from Tower Watson, so maybe we work for the same firm.
  Slightly confused about inflation now. I thought that if I forecasted using 5% as the growth without inflation, and didn't account for salary increases, I would get a pension forecast without inflation. Which would then be comparable to income today, or more importantly costs.
  I would have thought I'd need to assume a growth of 7% and 2% annual salary uplift to be including inflation?