Understanding your pension statement

Each year we'll send you a pension statement to tell you how your pension plan is doing.

Your statement shows:

• The current value of your pension plan and where you are invested.
• How much has been paid into your plan in the past year.

Your statement may also include an illustration giving you an estimate of the income you can expect when you retire if you bought a guaranteed income for life (annuity).

Understanding your illustration

Your statement includes an illustration of what taxable income you could get if you bought a guaranteed income for life (annuity) at your currently selected retirement age. Your illustration takes inflation into account because the cost of living is likely to go up between now and when you take your benefits. It is an estimate and will change if any, or all, of the assumptions change in future. Your illustration is based on assumptions which are set by the Financial Reporting Council (FRC).

From 1st October 2023, there are changes to the assumptions that may mean that the figures in your illustration are significantly different from those in illustrations issued before that date.

When providing your illustration, we must now assume that:

• You take a fixed annuity which doesn't go up with inflation each year. This means that your illustrated retirement fund purchases a much higher starting income but that income does not keep pace with inflation
• You will buy an annuity that is paid for your lifetime only (and for a minimum of five years), and
• You will take any guaranteed annuity option that you have.

From 1st October 2023, the basis for setting investment growth rates has also changed. When projecting the illustrated fund we must now base investment growth rates on the volatility of the fund that you are invested in. Volatility is a measure of how a fund’s price fluctuates over a period of time. If a price fluctuates less or stays relatively stable, it results in lower volatility. If a fund has a lower volatility, then we must assume it has a lower future growth rate than a fund with higher volatility. The FRC sets the growth rate assumptions that we must use for different levels of volatility. The volatility of funds is calculated over a 5-year period.

In the notes in your illustration we state the investment growth rate we've assumed.

Except for with-profits investments, the growth rates used for your illustration are derived from volatility data provided by FE fundinfo (UK) Limited.