Changes to how we estimate Statutory Money Purchase Illustrations
21 October 2024Our Annual Pension Statements for the Elevate Pension Investment Account (PIA) provide an update on the value and an estimate of what it could be worth in future.
On 1 October 2023, the rules for how we estimate Statutory Money Purchase Illustrations (SMPI) changed.
How we estimate what a pension could be worth
To estimate what a customer’s pension could be worth at retirement, we use several factors including the value of the Elevate PIA, how it’s invested and when they plan to retire.
Until 1 October 2023, UK pension providers set their own growth rates used for these estimates to show customers how their pension savings are expected to perform.
New growth rates
The Financial Reporting Council (FRC) introduced new growth rates to be adopted by UK pension providers from 1 October 2023. Our latest SMPI statements are the first to be issued since this change.
One of the four growth rates set by the FRC are now used: 2%, 4%, 6% or 7%, reflecting price changes for investments held within the Elevate PIA over the last 5 years.
How are statements effected?
Our estimate for what the Elevate PIA could be worth at retirement may be higher or lower than shown in previous years ‘statements, depending on the growth rates used. For example, if the latest growth rate under the new rules is lower than the growth rate used in previous years, what the Elevate PIA could be worth at retirement is likely to be lower.
This only impacts the estimate we provide in SMPI statements for customers who have not yet started to take pension benefits. It doesn’t change how investments perform or how they’re managed nor do these changes impact annual statements for those who have started to take pension benefits.