Pension valuation query

Pineapple88

Hi, 

I have a workplace pension (auto enrolment, Aviva is the provider) that I stopped paying into two years ago when I moved jobs. I've just had my annual statement through and I don't understand the basis for the valuation at the point of retirement. 

12 months ago my pension was worth £19.1k and now its work £21.5k, so an increase of approx. £2.5k. The projected valuation at retirement (in the 2050's) is £24.5k, based on a growth rate of 3.5% per year. 

How on earth is the valuation projected to be just £3k higher than the current valuation when it has at least another 30 years to grow? 

I'm not worried about what the valuation will actually be since that will be what it will be, more curious/wanting to understand what the projection is based on since it seems so far away from anything realistic. 

Thanks!

Hoenir

Pineapple88 said:

How on earth is the valuation projected to be just £3k higher than the current valuation when it has at least another 30 years to grow? 

In today's money. Inflation is eroding much of the gain. 

sandsy

The projection is reduced for expected inflation. This is so you can look at the  projected amount as if it was available to you today, ie today's money. 

dunstonh

 I've just had my annual statement through and I don't understand the basis for the valuation at the point of retirement. 

It is a synthetic calculation which is very pessimistic.   Aviva do state their assumptions in the projection,

How on earth is the valuation projected to be just £3k higher than the current valuation when it has at least another 30 years to grow? 

Because it is adjusted to show it in today's spending power.    The projection rates are adjusted to reflect the assets invested in (so low equity/high bonds will have a very very low growth rate.     High equity/low bonds will have a lowish growth rate).