Most With-profits investments offer a minimum guaranteed return, as long as you keep your plan for a specified length of time. If you switch or transfer out of With-profits funds or cash in your investment before that time, you'll lose this guarantee. The amount of guarantee will depend on the type of With-profits fund you invest in, the type of plan, and when you invested in it.
You can find more information on each fund guarantee on our With-Profits - useful information page under the heading ‘Where can I find information about any guarantees I may have?’
Standard growth rate calculation basis
All firms are required to carry out projections using growth rates that they consider appropriate for each asset class. As firms may have differing views, this means firms might not use the same growth rate for projections. Their charges may also vary. We calculate the mid-growth rate by taking the growth rates for the assets in the fund(s) you've chosen, cap any at 5.00% (if over 5.00%) and weight them according to the proportion of each asset held (the 'weighted average'). The growth rate for each fund is based on our view of potential long-term returns of the main asset classes (equities, property, corporate bonds, government bonds and cash) and will vary depending on the fund(s). We call this this Economic Growth Rate. This rate is not guaranteed.
The impact of the With-profit investment guarantee
Some of these underlying investment guarantees can often provide a better rate of return than the Economic Growth Rate. We take these investment guarantees into account in the estimated fund values at your pension date, that we show in our illustrations.
How do we do this?
We compare the return on your With-profits investments by using the Economic Growth Rate, against the appropriate With-profits guarantee, and use whichever is higher.
Terminal bonus/market value reductions
We include any terminal bonus and/or market value reduction applicable at the calculation date in the fund value we use for projections. However, these don't form part of the investment guarantees so aren't included in the guaranteed growth assumptions.
Illustrations to an age before pension date
These guarantees are linked to your pension date so where we're projecting to a date before your pension date then they don't apply.