It’s not possible to provide illustrations for every eventuality, so we‘ve made some assumptions when working out how much you might get back from your pension.
Remember, these are only ever estimates and these changes won’t affect how much money you’ll actually get back when you retire.
We follow mandatory rules from the Financial Reporting Council (FRC) when we work out what your pension could be worth in the future. This means that the method we use is consistent with other UK pension companies.
We assume that you don’t make any changes to your contributions. We also assume that the government doesn’t change the rules around tax relief in the future.
We’ve made assumptions as to the nature of investments you hold, their likely performance based on FRC rules whether you’ve chosen a lifestyling option. Your investment choices and their actual performance may not be the same as we have assumed.
We’ve also assumed that you remain invested in your current investments until you take a retirement option, irrespective of your age. For some customers it’s only possible to stay invested in certain investments for a set amount of time. We’ll be in touch before anything changes.
Inflation affects the buying power of your money. Think about how much more your weekly grocery shop costs today than it did ten years ago. It’s important to review your policy regularly with this in mind.
We’ve adjusted your illustrations to take yearly inflation of 2.5% into account, so you have an idea of how much retirement income you could get in today’s money.
Under this assumption, £10 in 20 years’ time would only be worth the equivalent of £6.10 in today’s money.
We take into account expected charges that you pay for managing the investment of your fund (this may be to a fund manager), and we take into account fees paid to us for administering your policy.
The retirement income illustrations assume that you buy an annuity when you retire.
Annuity rates available when you come to take your retirement option are likely to be different to what we’ve assumed, so make sure you get quotes based on your personal circumstances.
We’ve assumed that the amount of retirement income you receive remains the same for the rest of your life.
When you buy an annuity you may be able to take a portion of your pension pot as a tax-free lump sum (normally no more than 25%). Our figures assume that no lump sum is taken. We’ve assumed that when you take your retirement income it will be on a single life basis and payments will be guaranteed for five years. This means:
- If you die in the first five years of taking out your annuity, payments will continue until the end of the guarantee period. After this no more income will be paid.
- If you die after the first five years, your retirement income will end and no further benefits will be paid.
We’ve assumed that payments of your retirement income will be made monthly in advance.
There are other options available to you if you were to take an annuity, such as inflation proofing your income, taking a tax-free lump sum at outset or providing an income to a beneficiary if you were to die before them. If you took an income using any of these options it’s likely that you’ll receive a lower retirement income.
Note: These assumptions apply to almost everyone, however there are some rare exceptions. If this is the case we’ll confirm the assumptions that are correct for you in your annual statement.
Your actual retirement income will depend on a number of things, such as the performance of your investment, if your pension has any guarantees over the amount of income you get (such as a guaranteed annuity rate), your health and personal circumstances, and how much it costs when you buy an annuity.
The FRC changed their rules on 1 October 2023. The new rules looked at how much and how often the price of each investment changed over the last five years – this is sometimes referred to as volatility. Once the volatility for a fund is known we then use one of four assumed growth rates for that fund.
Before 1 October 2023, pension companies worked out their own future growth rates.
Remember: The amount you’ll actually get back will not change, just the estimation in your annual statement. If you were to compare estimates in your annual statement from now on to previous statements, you might see a difference
On the 6 April 2024 the FRC increased three of the four assumed growth rates. This means that compared to an estimate sent after 1 October 2023, the amount of money at your retirement would now be higher.
