Pension projection from pension provider

stranger12

Hi guys,

I have received an illustration of my plan from friends life and I am slightly confused as to how they deduce the amount i may get in retirement age.

I have contributed £850 this year which was matched by my employer so a total of £1700

My balance is £1700 including all previous years as this year is my first year of deciding to invest in pension

Age is 31
Now on the heading which reada as what might i get at returement, this is what i see


In todays price my plan could be worth: £233,000
In todays price your gross pension each year can be worth: £4890

So my question is how do they conclude i can get £233,000

Is it on the basis that my plan will grow at 4.6% for the next 40 years as if I did not contribute a penny more?

Or is it based on constant contribution from me and what it is saying is if i paid £1700 for rest of my life then my plan will be worth 233k?

Many thanks

dunstonh

I am slightly confused as to how they deduce the amount i may get in retirement age.

They use a bunch of assumptions that are statistically unlikely to be accurate.

So my question is how do they conclude i can get £233,000

If you read the notes that go with the projection it tells you.

Is it on the basis that my plan will grow at 4.6% for the next 40 years as if I did not contribute a penny more?

Not unless you asked for a projection with no further premiums.

Or is it based on constant contribution from me and what it is saying is if i paid £1700 for rest of my life then my plan will be worth 233k?

The £233k is based on an example growth rate, minus inflation to give a value in todays terms. The income figure typically uses an example annuity rate using options for one of the lowest annuity rates you can get (and virtually no-one uses). The projected growth rate is before charges. Yet investment returns are published after charges. So lets say the mid rate projection was 4% and the charges were 1% then the mid rate projection is actually saying 3% net growth. And with inflation assumption of 2.5% then the mid rate projection is actually 0.5%.

sandsy

As it's a workplace scheme, it will assume that you and your employer continue to contribute until retirement and that the the % of salary of earnings remains constant. However, there will be an assumption for earnings growth too.

No projection will be accurate, no matter how much complexity is applied to coming up with the assumptions. They're just designed to give people a rough idea of what they might get back using relatively simplistic assumptions.