How can I find out more about projection rates?

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We’ve put together a list of commonly asked questions about growth rates. If there’s anything else you need, you can use our contact form(Opens new window)(Opens new window), call or write to us(Opens new window)(Opens new window), or tweet us(Opens new window)(Opens new window)(Opens new window)(Opens new window)(Opens new window)(Opens new window).

Please remember that projections aren't guaranteed and what you get back depends on the performance of the fund(s) you're invested in. 

These are estimates we use in personal illustrations to show the potential returns for an investment in a pension fund. They’re based on the types of investments in a fund.

It's a regulatory requirement to show low, mid and high growth rates to give you an idea how much your savings could be worth when you take your benefits.

Low and high rates are 3% below and 3% above the mid growth rate, respectively. It’s possible that the low rate could be a negative growth rate. For example the mid rate for the Cash fund, if you’re in an insured pension fund is 1.25%. So the low rate would be -1.75% 

However, if you're invested in a With-Profits fund that has guarantees, we take account of these guarantees before calculating the low, mid and high growth rates, so the 3% difference below and above the mid growth rate may not apply to you and this is shown on your statement.


It means that the estimated growth rate is lower than 2.50%, which is the rate of inflation that we use for projecting your future benefits. To keep your fund's current value you need growth rates that match the rate of inflation. For your fund to grow in value, you need growth rates that are higher than the rate of inflation. There is 3% difference between the low, high and mid growth rate so for example where the mid growth rate is 5.00%, after discounting for inflation it will be 2.44% and the low growth rate will therefore be a negative figure.

Growth rates are simply estimates - when you come to take your benefits, your pension income will depend on how your investments grow, interest rates and charges.

The low and high rates are worked out from the mid growth rate before it is adjusted for inflation. The unadjusted figure is then rounded down to the lower 0.25%.

If you're invested in a With-Profits fund that has guarantees, we take account of these guarantees before calculating the low, mid and high growth rates.

Each provider decides the rates of return they believe are suitable for different types of investments. Some may be more or less optimistic. Different providers might use different rounding conventions to arrive at the mid rate. Charges, deductions and any investment guarantees will also vary.

Estimated fund values in illustrations are shown after all charges have been deducted.

We use the growth rates we’ve agreed for that asset class where a fund invests in one type of investment, for example equities.

Where a fund is invested in more than one type of investment, for example asset classes such as bonds, UK equities, cash or property, to get an assumed mid rate of return for each asset class we need to multiply by the percentage invested in each asset class and add these together to get the overall mid rate for the fund. The low and high rates are 3% below and 3% above the mid-growth rate. The projection rates we show are after we’ve made an adjustment for inflation of 2.50% a year.

So, for example, if a fund invests 50% in UK equities, 30% in UK corporate bonds and 20% in government bonds, the mid rate would be:

(0.5 x 5.40*) + (0.3 x 3.20*) + (0.2 x 2.40*) = 4.14 which we round down to 4.00% as we round down to the lower 0.25%.

* is the mid rate for that investment

We then adjust this for inflation of 2.50% to show this in real terms which gives a mid rate of 1.46%.

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 at new window)(Opens new window)

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% (if over 5%) 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 now 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.


Ms Rabadi's plan is wholly invested in the Profit Endowment fund (WPE) which has a minimum yearly return of 5.5%.

The Ecomomic Growth Rates for WPE funds are:    

Low-growth rate is -0.4%  Mid-growth rate is 2.6% and High-growth rate is 5.6%.

The illustration is to her pension date which is 10 years away.

Her current fund value is £60,000 (which is the total guaranteed value of £50,000 plus terminal bonus of £10,000).

Growth rate comparison

We use the following calculation to work out the estimated fund value:

Economic Growth Rate, is the total current fund value including terminal bonus X the Economic Growth rate to the power of ten = the estimated fund value.

Guaranteed Growth Rate is the total 'guaranteed' fund value X Guaranteed Growth Rate to the power of ten = the estimated fund value.

Economic Growth Rate

Low £60,000 X 0.996^10 = £57,642
Mid £60,000 X 1.026^10 = £77,558
High £60,000 X 1.056^10 = £103,464

Guranteed Growth Rate

Low £50,000 X 1.055^10 = £85,407
Mid £50,000 X 1.055^10 = £85,407
High £50,000 X1.055^10 = £85,407

^ = value to the power of ten

So in the illustration, we'd use the Guaranteed Growth Rate for the 'low' and 'mid' projections because it is more than the Economic Growth Rate, but the Economic Growth Rate for the 'high' projection.

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.

Because that is the rate the regulations require us to use. We use inflation of 2.50 % on the low, mid and high growth rates to show the effect of inflation on your estimated pension benefits.

If you're investing in several funds (portfolio), to calculate the portfolio weighted rate we multiply the fund weighted rate for each fund by the proportion (%) it forms of the total portfolio. Once the portfolio weighted rates for all funds are calculated, we add them together to get the overall portfolio weighted rate. The overall portfolio weighted rate will be rounded down to the lower 0.25% to get the mid rate and then adjusted for 2.50% inflation.

We’ll use the manager’s benchmark or average asset allocation - or discuss the long-term strategy with the manager - and apply weightings to arrive at an appropriate fund growth rate.

Lifestyle funds are only available to pension investors. When investors are still some way off from retirement, they’re invested in a fund that aims to grow their investments. We've a number of different lifestyle funds, some investing entirely in equities, others investing in a mix of investments. In the five or six years before retirement, lifestyle funds progressively move into investments better suited to helping protect annuity-buying power as retirement approaches, for example cash or bonds. These investments are generally regarded as having less growth (or loss) potential.

We take this change of investment strategy into account when calculating the projected maturity value for a lifestyle fund at retirement. Otherwise the projected maturity values would be unrealistically high because it would be based solely on the investments in the growth stage of the lifestyling process.

Find out how changes in the way we show projection rates affects your pension or investment product(Opens new window).

We’ve assumed that you’ll pay the same contributions (taking account of any increase in contribution that you've chosen) for the life of your plan. However, like your investments, these are affected by inflation, so we’ve shown these contributions after an adjustment for inflation of 2.50% a year. This is a regulatory requirement for all pension providers.

We don’t show a projection for tax-free cash if your pension could be less than £120 a year.

Tax-free cash was not shown previously. We’ve now included this option because most of our customers take this.

You may be entitled to more or less than we show, for example, you’d be entitled to more if you have fund protection.

The nominal rates (which aren't adjusted for inflation) which we use in illustrations have been reduced to:

Low 1.50%
Mid 4.50%
High 7.50%