Questions and Answers

What’s the purpose of this video?

This video gives you an estimate of your yearly retirement income. This is based on your current pension fund and any other pensions that you’ve told us about.

What’s my current pension balance forecast? And how does this fit in with my retirement income?

Your current pension balance forecast is an estimation that includes future contributions and investment growth.

We work out your yearly retirement income by combining income withdrawals from your current fund (known as income drawdown), with other sources of pension income (like the State Pension).

You can compare your yearly retirement income against your desired target income. And we’ve given you some options to consider that can help boost your estimated annual retirement income.

Why is this important for me?

It’s important to prepare for retirement – and knowing what you have and what you need is key.

You can use this video to monitor your expected retirement income. And if it’s lower than what you need, you can make decisions now to change it.

You can directly influence your yearly retirement income by changing:

• Contribution levels: If you increase your contributions, you’ll have a higher amount available in retirement.
• Target retirement age: If you retire at an older age, you can increase how much income you have. You’ll have extra contributions and more investment growth, and your fund will have fewer years to support you.
• Desired target income: If you have a high target income, you may need to aim for a more realistic target.

You may have noticed we talk a lot about investment growth. That’s because it plays a big part in building your retirement funds. Your pension is invested in various assets, contained in a portfolio. When these assets grow, so does your retirement fund.

You can change how much this affects your pension by investing in riskier assets. Riskier assets may provide you with higher returns – and grow your retirement funds faster. But they have a big downside: they can also impact your funds negatively. So, you need to consider your risk appetite before choosing these assets. If you want to explore your risk profile in more detail, speak to your pension provider.

Your pension provider has given us the details of your investment profile, so we’ll use that to work out investment growth in this video.

The values shown in the video look lower than what I was expecting at my retirement – why?

All the money shown in your video has been converted to today’s prices. In the future, your expected retirement income will increase with inflation.

Seeing your expected retirement income in today’s prices means you can easily check whether this will cover your essential living costs.

The State Pension represents a big portion of my retirement income. Am I guaranteed to receive this?

No. Your eligibility and right to the State Pension is based on how many qualifying years are shown on your National Insurance records.

We’ve assumed that you’ll receive the full flat rate from State Pension age. But if this isn’t the case, please tell your HR department straight away. This might have a noticeable impact on your results, so it’s important to sort it as soon as possible.

Why is my retirement income only an estimate?

We make several assumptions when calculating your expected retirement income. These are based on future economic conditions like investment growth, inflation, and salary or contribution increases.

Your values are shown as estimates because:

• We can’t tell the future, so we can’t predict economic factors like inflation and investment growth with absolute certainty. But we cover as many outcomes as we can: we model 1,000 possible future scenarios and give you the average outcome.
• We use generic asset classes to represent your current fund portfolio, rather than the specific individual assets that your pension is invested in. So, the investment growth is a rough indication of what might be achievable.
• We need to estimate how long you’re expected to live for. This will have a big impact on your funds, as your yearly income depends on how many years you need it for. We don’t take your individual health circumstances into account, and we assume that you have no underlying medical conditions.

How frequently should I review my funds?

Checking your retirement funds once a year is enough for now. This gives you time to make sure you’re on track to reach your targets and make any changes if not.

When you get closer to retirement, you may want to review your funds on a quarterly basis.

We will update the economic assumptions on a quarterly basis too.

Is there anything else I should know?

Income drawdown

This video uses income drawdown from all your pension funds to give you a total yearly retirement income.

Income drawdown lets you choose how much you take out from your pension fund each year. So, you can be flexible with your finances. For example, you may want to withdraw more in the early years of your retirement.

This isn’t your only option at retirement: you could purchase an annuity instead. Speak to HR if you want to know more about the differences between income drawdown and annuities.

Average results

Your retirement income is the average result taken from the 1,000 scenarios that we model. There’s a wide spectrum that your results could fall under, so your actual retirement income may be substantially different to what’s shown here.

We use pre-determined amounts instead of the actual investment fees and charges that you’ll incur. So, these assumptions may not reflect your actual charges. We also assume that you’ll remain invested in your existing assets throughout your life, and that you won’t change providers, switch funds or terminate your policies.

Defined benefit pensions

If you have a defined benefit pension, we assume all your entitlements increase in line with inflation – as your pension will once it’s being paid out.

We haven’t considered:

• Income vs cash benefits
• Lifetime allowances
• Contribution implications
• Tax implications

We assume your other pension benefits will be paid at the standard age. For example, the State Pension at the State Pension age, and defined benefits at your scheme pension age.

Professional advice

This video is for illustration only, given the limitations we’ve discussed above. It’s to help you think about your current savings and what you can expect to receive at retirement.

We don’t provide any recommendations. So, if you plan on taking any action or need more detailed help, you should consider going to a financial adviser.

If you need more information, please contact HR.