About the figures in your 2024 statement

Why is the value of my future pension from my DC account different from the value shown in my 2023 statement?

We’ve shown you the benefits that you might be able to get from your deferred DC account by assuming that you’ll convert it to a pension with an external provider, usually an insurance company. This is known as an annuity. It’s important to remember that the cost of buying an annuity varies and is likely to change each year. You don’t have to convert your deferred DC account into an annuity, though.

Find out more about your options at retirement

When we work out the amount of pension you could buy with your DC account, we base our calculations on several things. These include:

• How much we expect your DC account to be worth at your target retirement age, which is based on factors like:
• when you expect to retire,
• the savings you built up in your DC account while you were an active member of the Fund, and
• future investment returns on your savings.
• How much we expect it to cost to provide a pension from your DC account by using it to buy an annuity that guarantees you an income for the rest of your life.

How do I access my DC savings when I retire?

In your benefit statement, we’ve converted the projected value of your DC account when you retire into a pension. If you decide you’d like to access your DC account in this way, you’ll need to transfer it to an external annuity provider and buy an annuity product from them.

However, there are different ways to access your DC account when you retire. For example, you could choose an income drawdown arrangement instead. Again, you’d need to transfer your DC account to an external provider that offers drawdown products to do this.

Find out more about your options at retirement

Why are my statutory money purchase illustration (SMPI) figures different to my pension statement figures?

If you had a DC account balance at 31 March 2024, by law we must provide you with an SMPI as well as your pension statement. You can find your SMPI on page 5 of your deferred pension statement.

Our specialist advisers have calculated the figures on page 3 of your pension statement with the aim of giving you a more realistic idea of how much pension you could receive. They use different, more up-to-date assumptions than the industry-standard assumptions we use to calculate your SMPI.

Last year, the government changed the assumptions the pensions industry must now use for calculating SMPI statements, and we’ve applied these new assumptions to your 2024 SMPI statement for the first time. This means your SMPI figures may look quite different from last year’s SMPI figures and also from the ‘realistic’ projections we’ve shown in your pension statement. As well as taking into account the new industry-standard assumptions, your SMPI statement also reflects market conditions as at February 2023 (the date prescribed by government). At that time, interest rates were significantly higher than those used in your 2023 SMPI statements (at February 2022). This led to an improvement in annuity rates since last year, which means your projected pension in this year’s statement is higher.

What’s changed?

While SMPI assumptions can change every year, last year the government changed two key elements. Previously, when calculating the figures in your SMPI statement, the government required us to assume that you would buy a pension that increased each year to help it keep up with inflation. We also had to assume that the pension you would buy included a spouse’s pension (or equivalent), so if you died before your spouse, your annuity policy would provide them with a pension for the rest of their life at 50% of the value of your own pension.

The changes the government has made to SMPI assumptions now mean we’ve had to assume that the pension you buy won’t increase with inflation every year, and that your annuity policy ceases when you die. The rates for buying an annuity that doesn’t increase with inflation or include a spouse’s pension are lower than the rates for one which does – this means that when we calculate the pension you could receive using the updated SMPI assumptions, we estimate you’d be able to buy more pension with your DC savings. This is why your SMPI projections might show a higher estimated annual pension than last year.

The ’realistic’ assumptions we use to calculate the figures in your pension statement still assume that you’ll buy an annuity that will provide a spouse’s pension and that will increase every year to help it keep up with inflation when you retire. As these features ‘cost’ more to buy, the estimated pension we show in your pension using our more ‘realistic’ assumption might be lower than your SMPI projection.

Assumptions

You can find out more about the assumptions we used to estimate the figures on page 3 of your statement in the assumptions document we sent with it.

Still have questions?

The Pensions Team will be happy to help – you can get in touch using these contact details: