How is the value of a pension calculated?

Pension calculation involves estimating the amount of money you will receive after retirement, based on several factors. The process typically includes determining the total contributions made during the working years, the expected rate of return on those contributions, and the duration of the retirement period.

Different pension plans use varying calculation methods.
A pension calculator typically works by asking for these details and applying a formula to project future financial needs. For instance, the formula used can be:
FV = PV (1+r) ^n
Where:
FV is the future value, or the amount required after retirement
PV is the present value or current savings
r is the expected rate of return
n is the number of years until retirement
By inputting your details into an online pension calculator, you can estimate how much you need to save regularly to reach your retirement goals.