I don't drive and I've never enjoyed driving. Moreover my eyesight is very poor and I fear I may be a danger on the road. However, some 'friends' and family don't get this, so I want to show a calculation of how much more money I save in a pension by not driving. Here is my calculation:
- £3,000 cost per annum (present day terms) to run a car
- 7% interest from a pension
- 20% basic rate of tax, for tax relief
- Number of periods investing into pension: 44 years
- There is a cost saving from not having a car. This is 44*£3,000 = £132,000
- There is interest from the pension: £3,000*1.07^44 = £58,885
- There is tax relief, i.e. pension contributions are not subject to income tax. This is 0.2*44*£3,000 = £158,400
Total this up gives an additional £349k for retirement.
My question is, is my calculation correct?