Changes to your yearly statement

This is a statement we issue to you every year showing the value of your pension and how much your pension might be worth at retirement. The purpose of the statement is to keep you informed about your pension savings and to help you plan for the future.

We’ve made changes to:

• The growth rate assumptions used in calculating the value of your projected pension value at retirement, and
• The shape or form of the annuity you are assumed to purchase at retirement.

The changes apply to all yearly statements produced on or after 1 October 2023 and are explained in more detail in the sections below.

We’ve made these changes to comply with the revised assumptions set in rules by the Financial Reporting Council. The changes don’t affect your actual pension value and you’ll still be able to choose how to take your pension savings from the retirement options available to you at that time.

Yes. All pension providers must move to the new the assumptions from 1 October 2023. This is to ensure you get a consistent approach used by all providers and can compare your pensions more easily.

The growth rate assumptions used to calculate the projected pension value shown on your yearly statement have changed to comply with the new rules.

Previously the projected pension value was calculated using growth rates based on how we expected our funds to perform in the future. From 1 October 2023, all pension providers must use a standard approach with growth rates based on how the performance of your funds has varied in the past five years. This is referred to as the volatility of the fund.

The more volatile or variable a fund’s performance has been over the last five years, the higher the growth rate used in calculating the projected pension value for that fund. Conversely the less volatile the fund, the lower the growth rate used. This is because more volatile funds are expected to deliver higher returns over the longer term, but this is not guaranteed.

The growth rates used for some of our funds, in particular higher risk funds that invest in stocks and shares and property, have reduced. At the same time, the growth rates used for other funds have increased. This reflects the fact that Royal London offers well managed funds with low levels of volatility.

Yes. All pension providers must recalculate their growth rate assumptions each year based on how volatile their funds have been over the previous five years.

No. Your projected pension value is only an illustration of what you might get back, based on assumptions, and is not guaranteed. The size of your fund and level of pension that may be payable will depend on the future investment returns and level of contributions made. 

The shape or form of the annuity shown on your yearly statement may have changed.  It is now: 

• Single Life – previously it may have been a Joint Life annuity
• Level (no increase) – previously we may have assumed 3% pa escalation in line with inflation
• 5-year guarantee – previously there may have been no guarantee. 

Some products may already use the new shape/form of annuity in previous yearly statements.

An annuity is an insurance product that allows you to swap your pension savings for a guaranteed regular income that will be payable for the rest of your life.

If you take a single life annuity, the payments will end once you die. Whereas under a joint life annuity, the payments will continue to a designated person after your death.

Inflation is the increase in prices over time.

We guarantee that if you die within five years of starting the annuity, we will make the annuity payments for the remainder of the five year term. 

The previous assumption may have been for a Joint Life annuity which increases annually in line with an assumed 3% pa inflation. These features are more costly to provide which mean the starting level of annuity payments you receive would be lower. 

You don’t need to do anything, however you should review your pension savings regularly to ensure you are saving enough for your retirement.

The projected pension value is only an illustration of what you might get back based on assumptions. However if you remain concerned, we recommend that you consider speaking to a financial adviser. They can give you personal advice and practical help to make an informed decision. 

Before you make any changes to your plan with us, we recommend that you consider speaking to a financial adviser. They can give you personal advice and practical help to make an informed decision.

You’ll see a difference in the projected pension values shown on other personal illustration requests as these projection assumptions are set by the Financial Conduct Authority and not the Financial Reporting Council. They usually show three potential examples - low, mid and high - to give you an alternative idea of what your plan may be worth in the future.