How we set our growth rates
In our illustrations for our pension and life products, we use growth rates that are based on the actual funds invested in.
Asset class growth rates
The rate for each fund is determined by considering the asset allocation of the fund and assumed return for each asset class. The rates we’ve used for our asset classes are shown below:
| Pensions | Pensions | Pensions | Life | Life | Life | |
|---|---|---|---|---|---|---|
| Asset Class | Low | Mid | High | Low | Mid | High |
| Cash | 1.30% | 4.30% | 7.30% | 0.80% | 3.80% | 6.80% |
| Government Bonds (UK All Maturities) | 1.80% | 4.80% | 7.80% | 1.30% | 4.30% | 7.30% |
| Government Bonds (UK 1-5 years) | 1.30% | 4.30% | 7.30% | 0.80% | 3.80% | 6.80% |
| Government Bonds (Global All Maturities) | 1.70% | 4.70% | 7.70% | 1.20% | 4.20% | 7.20% |
| Corporate Bonds (UK All Maturities)* | 2.00% | 5.00% | 8.00% | 1.50% | 4.50% | 7.50% |
| Corporate Bonds (UK 1-5 years) | 1.60% | 4.60% | 7.60% | 1.10% | 4.10% | 7.10% |
| Corporate Bonds (Global All Maturities)* | 2.00% | 5.00% | 8.00% | 1.50% | 4.50% | 7.50% |
| Index Linked Bonds (UK All Maturities) | 1.70% | 4.70% | 7.70% | 1.20% | 4.20% | 7.20% |
| Index Linked Bonds (UK 5 years) | 1.10% | 4.10% | 7.10% | 0.60% | 3.60% | 6.60% |
| Index Linked Bonds (Global All Maturities) | 1.50% | 4.50% | 7.50% | 1.00% | 4.00% | 7.00% |
| Property* | 2.00% | 5.00% | 8.00% | 1.50% | 4.50% | 7.50% |
| UK Equity* | 2.00% | 5.00% | 8.00% | 1.50% | 4.50% | 7.50% |
| Developed Market Equity* | 2.00% | 5.00% | 8.00% | 1.50% | 4.50% | 7.50% |
| Emerging Markets Equity* | 2.00% | 5.00% | 8.00% | 1.50% | 4.50% | 7.50% |
| Absolute Return | 1.30% | 4.30% | 7.30% | 0.80% | 3.80% | 6.80% |
| Global High Yield* | 2.00% | 5.00% | 8.00% | 1.50% | 4.50% | 7.50% |
| Commodities* | 2.00% | 5.00% | 8.00% | 1.50% | 4.50% | 7.50% |
*Pension rates have been capped at 2%/5%/8% and Life funds at 1.5%/4.5%/7.5% as per FCA guidelines.
These growth rates are reviewed on a regular basis. Assumed fund growth rates show a 3.0% spread between Low and Mid, and between Mid and High.
Annual Statement Growth Rates
Different growth rates are now used on the statements issued every year.
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 table below shows how the volatility group and associated rate is determined by the calculated historical volatility of each fund:
| Historical 5-year Volatility | Volatility Group | Accumulation Rate | |
|---|---|---|---|
| Equal to or above | Less than | ||
| 0% | 5% | 1 | 2% p.a. |
| 5% | 10% | 2 | 4% p.a. |
| 10% | 15% | 3 | 6% p.a. |
| 15% | Unlimited | 4 | 7% p.a. |
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.
You can find links to the pension and life fund growth rates at the bottom of the page.
It’s important to remember that the plan values we show in our illustrations are only a guide and are not guaranteed in any way, and you may get back less than the amount originally invested.
LEAF and Moody’s Analytics
The Asset Class Growth Rates are set by Royal London’s Long-term Economic Assumptions Forum (LEAF).
The forum sets these rates by reviewing a variety of data to determine what a suitable growth rate assumption might be for each of the asset classes listed above.
The main source of the data used by LEAF is provided by risk management consultants Moody’s Analytics. The Moody’s Analytics model is acknowledged as an industry-leading tool for predicting future investment returns across many different asset classes. It takes into account many decades of historical investment return data as well as various future indicators of returns.
More information about Moody’s Analytics can be found at their website.
Fund level growth rates
We will regularly review the fund level growth rates for each of our investment funds.
You can find out more information about our assumed illustration growth rates in the following documents: