The Financial Reporting Council (FRC) introduced changes to how estimated pension pots are calculated from 1 October 2023 to improve consistency across different pension companies and arrangements.
These are changes are that:
- the assumed future investment returns used to calculate how much your pension may be worth at your selected retirement age now looks at the monthly returns of each investment fund over the previous 5 years,
- your pension is calculated assuming it does not increase in payment and there will be no income paid to a surviving spouse/civil partner after your death. This is also referred to as a level single-life annuity, and
- your estimated pension pot is calculated based on the contributions paid in the previous 12-month period (with an assumed increase of 2.5% each year) rather than your salary and contribution percentage at the end of the tax year.
- How will the changes affect what you see on your statement?
Most members will see a change in their projected pension pot at retirement and their estimated yearly pension.
If your contributions over the past 12 months have changed (e.g., being on maternity leave), this may affect your estimated pension pot at retirement as the calculation will assume that your contributions will continue at this amount (with an assumed increase of 2.5% each year) until retirement.
- Where can you find more information about the assumptions that are used for your statement?
Please visit www.pearson-pensions.com/benefit-statement-assumptions-2024. The figures are shown in ‘today’s prices’ and allow for how the price of goods and services might increase in future.
- What can you do if you are concerned about the changes to your annual benefit statement?
It is important to remember that the figures shown in your annual benefit statement are not guaranteed and are for illustration purposes only.
Pensions are a long-term investment. The retirement benefits you receive from the Plan will depend on several factors, including the value of your pension pot when you decide to take your benefits which is not guaranteed and can go down as well as up.
You also do not have to take your pension in the form we show in your annual benefit statement.
