This year there have been changes to the assumptions used to calculate your benefit projection. This means that your pension projection has changed (most likely downwards) compared to last year’s statement. More details on the key reasons for the changes, and the impact they have had on your projection, is summarised in the table below:
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Assumption
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Impact
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Future expected investment returns have been reduced
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This due to a change in investment market conditions compared to last year and is likely to mean that your projected pot size at retirement will be lower. This will reduce the level of the projected annual pension you can expect to receive in retirement.
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Annuities are more expensive to buy
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The current investment environment also means that the cost of converting your pension pot into a regular pension at retirement (an annuity) has increased. This will reduce the level of the projected annual pension you can expect to receive in retirement.
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Life expectancies are shorter
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The assumption on life expectancies has decreased slightly over the year, meaning that on average people are expected to live for a shorter period of time compared to last year. This has led to a slight reduction in the cost of converting your pension pot into a regular pension at retirement and will increase the level of the projected annual pension you can expect to receive in retirement.
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The table above highlights the three key assumptions which will have had an impact on your projected pot size at retirement and therefore your projected income in retirement. As you will see, two of the three of these will decrease your projection of benefits, making the overall impact a reduction of between 5-15% in your annual DC statement in 2021, depending on your own circumstances.
These reductions may be offset in individual cases by the addition of contributions paid into your pension pot over the year if you are an active member of the Plan, and actual investment gains earned on your funds between 1 April 2020 and 31 March 2021.