Pension and Investment Illustration Rates 2014

Pension and Investment Illustration Rates 2014.

Many may not be aware that when an insurance company or investment company offers you a quotation, known as a key facts illustration, certain rules are laid down by the financial industry regulator, the Financial Conduct Authority, as to how this quotation projections are calculated.

Up to March 2014, when you received a pension forecast or investment statement the illustration rates were as follows:

For Savings and Investments

• Low 4% pa
• Medium 6% pa
• High 8% pa

For Pensions

• Low 5% pa
• Medium 7% pa
• High 9% pa

New Rates for Projections 2014

With effect from April 2014, new growth rate assumptions are as follows:

Savings and Investments from April 2014

• Low 1.5% pa
• Medium 4.5% pa
• High 7.5% pa

Pensions from April 2014

• Low 2% pa
• Medium 5% pa
• High 8% pa

Pensions Inflation 2014

New for pensions is also a compounded inflation adjustment of 2.5% pa to give you an idea of the real spending power of your pension at retirement in today’s terms.  This means you see illustrations and yearly statements with adjusted pension projection rates of  

• Low -0.5%
• Medium 2.4%
• High 5.4%

What does all this mean for my pension?

It means that you will see dramatically reduced projected figures in the future on your pensions and investments statements.

We suggest the new projection rates are more realistic in today’s low investment return and inflation climate.  For many savers, the inflation adjusted pension figures may show the need to save nearky double what they think they need to achieve a realistic pension.

It may come as a surprise to many, but your pension forecasts will fall.  It should help in that you can now be more realistic about how much you should save for retirement.  Both the government and the regulator are committed to making people more aware of their financial future.  The realistic illustration rates will go some way to helping us all understand the need to save.

Contact us for help with your pension and investment planning.  We can help you work out what you need to save for a comfortable retirement.