Because of inflation, the cost of almost everything goes up in time. For that reason most forecasts of pension income are done in today’s dollars so that you get a better understanding of the standard of lifestyle that you will be able to afford.

Usually it is assumed that inflation will be between 2% and 3% - this is the Reserve Bank of Australia’s target range. If fund earnings remain the same and inflation is low, you will be better off than the forecasts indicate. But if fund earnings remain the same and inflation is higher than 3%, you will be worse off.

It is important to note that the forecasts are just that. They cannot be totally relied upon because of the unknowns that may occur over the next 80 years – these would include wars, natural disasters and environmental disasters.