This information applies to Aegon pension funds only.
We make assumptions based on our best estimate of the annual returns we expect certain types of investments (asset classes) to produce over the medium to long-term.
The pension fund uncapped growth rates are based on five-year volatility of the fund (where available). For funds investing in a single type of investment, we use the following growth assumptions:
| Investment type (asset class) | Pension funds (mid-growth rate) capped |
|---|---|
| Cash | 4.40% |
| Government bonds | 4.40% |
| Corporate bonds | 5.00% |
| High yield bonds | 6.80% |
| Property | 6.00% |
| UK equities | 7.00% |
| Overseas equities | 7.00% |
Source: Aegon UK. These growth rates are assumptions and are not guaranteed.
Please note: these are the returns we estimate for each asset class, not the returns you’ll see on your illustration, which will be adjusted for inflation. In addition, in line with Financial Conduct Authority (FCA) regulations, if our estimated return for a fund at the mid-growth rate is above 5%, we’ll reduce this to 5% on your illustration before allowing for inflation. This is referred to as the ‘capped’ rate. You’ll only see the capped rate if you’re a financial adviser setting up a new plan or an investor viewing your plan details via our online services.
For funds investing in a mix of investment types like those shown above we calculate a mid-growth rate based on the percentage invested in each investment type multiplied by the appropriate rate for that investment type.
For example, for a capped rate, if a pension fund has 70% invested in overseas equities, 20% invested in government bonds and 10% in cash, the calculation would be as follows:
| Investment type (asset class) | % invested | Assumed annual rate of return | Weighted annual rate of return (% invested x assumed annual rate of return) |
|---|---|---|---|
| Overseas equities | 70% | 7.00% | 4.90% |
| Government bonds | 20% | 4.40% | 0.88% |
| Cash | 10% | 4.40% | 0.44% |
| Fund projection | 6.22% |
Source: Aegon UK. These growth rates are assumptions and are not guaranteed.
The weighted growth rate of 6.22% is then reduced for the effects of inflation for pension funds.
The value of an investment can fall as well as rise and isn’t guaranteed. The value of your pension pot when you come to take benefits may be less than has been paid in.
We regularly review our projection rates and will change them from time to time. These rates are effective from April 2024.