We use a method called a Statutory Money Purchase Illustration (SMPI) to work out future pension estimates for you. All pension providers must use this method.
Your SMPI assumes you’ll use your pension savings in the Scheme to buy a pension – also known as an annuity – when you retire. It shows an estimate of the amount of pension you might get, in today’s money. (You don’t have to buy a pension – other options are available – but this keeps it simple and makes it possible to compare your estimates from year to year.)
How we work out the estimates on your benefit statement
We start with the estimated value of your pension savings on 31 March each year. But lots of things can affect the value of your pension between that time and when you decide to use your money – so we had to make some assumptions to work out your future pension estimate.
Assumptions about costs, contributions and inflation
Your SMPI assumes:
- the values and investment unit prices in your benefit statement for 31 March are correct
- any contributions we received after 31 March aren’t included
costs and charges are the same as they are at the date of your benefit statement - you and your employer continue to pay contributions to the Scheme at the same rates you were paying at the date of the benefit statement
- your pensionable earnings (the earnings that count towards your pension contributions) increase at 2.5% a year to the date you retire (we assume this is your State Pension age unless you’ve told us something different), and
- inflation will be 2.5% a year to the date you retire.
Assumptions about investment
Your SMPI assumes:
- we invest your pension savings in the Diversified Growth Fund until 10 years before you’re due to retire.
- from this date we gradually switch them to the Retirement Countdown Fund, and
- the investment funds will grow at the following rates:
- Diversified Growth Fund: 5% a year
- Retirement Countdown Fund (Series I and II): 2% a year.
Find out more about how your pension savings are invested.
Assumptions about how you use your pension savings
Your SMPI assumes:
- you will use your pension savings in the Scheme to buy a pension (annuity)
- your pension won’t increase, and
- your pension won’t include a spouse’s or civil partner’s pension.
The future pension figures on your benefit statement are estimates in today’s money. What actually happens will be different from what we’ve assumed, so these figures don’t come with a guarantee. For example, you may not use your pension savings to buy a pension. If you do buy a pension, its value depends on things like investment performance and the cost of turning your pension savings into an income, which may be different from the assumptions we’ve made here.
We can’t promise that your benefit statement shows the actual amount of money you, or anyone else who benefits from your pension, will get. You could get more or less than this amount. These figures are a guide to help you plan for the future. See more in our costs and charges explained booklet.