Retirement income tool assumptions

Important information about your pension and income projections

We have provided these projections to help you think about whether your pension plan is on track to give you the income you want from it.

The projections of pension fund value and income are based on a range of assumptions. They may not match what happens in reality and you may achieve different results. The actual fund size and the income from it may turn out to be lower or higher than our projections.

You must not rely on these projections as the main basis for your personal retirement planning decisions. They are not a personal recommendation for any particular investment or course of action. If you need help deciding what would be the right investment or decision for your particular circumstances, we recommend that you speak to a financial adviser.

Introduction and key points

• These projections are estimates of how much you might receive each year from your pension savings when you retire and how this compares with the income you might need. 
• The figures are quoted in today’s prices, so you have an idea of what you will be able to buy with your pension when you retire. This will help you decide if you are paying enough into your pension, or if you need to save more. 
• These figures are only examples and are not guaranteed - they are not minimum or maximum amounts. The actual value of your pension will depend on how your investments grow and the tax treatment of the investments.
• These projections only take account of your current pension with Fidelity. If you have pensions with other providers, they may provide you with additional income. 
• You may receive a State Pension(s) in addition to the income shown in the projection.
• Pension rules and your entitlement to tax relief may change in the future. We have assumed that you will be entitled to tax relief at the current rate on all your contributions. We have also assumed that you will not be affected by the capped drawdown income limits, annual allowance or money purchase annual allowance, all of which can restrict the amount you can contribute to a pension without a tax penalty.
• Your projections allow for any pension-sharing order that is linked to your account, but not any pension-earmarking orders. Contact us for more information.

General Assumptions

• The estimate of your future pension fund value that we have provided uses the same methods as the statutory money purchase illustration (SMPI) which we include in your annual statement
• The assumptions we use for SMPI forecasts are set out by the Financial Reporting Council in their Technical Memorandum. All firms follow these guidelines so the assumptions are not based on Fidelity's view of how markets might perform. To find out more, visit  www.frc.org.uk

How much you will contribute to your pension between now and retirement

• If your contributions are based on a percentage of your salary, we have assumed that your salary, and therefore your contributions, will increase in line with inflation. We have also taken into account any changes to your contributions that happen because of your plan rules - for example, contributions may increase as you get older.
• If your contributions are a fixed amount, we have assumed they will not increase. (The effects of inflation will mean the fixed amounts will be worth less over time.) 
• Where appropriate, the projection takes into account tax relief in respect of future contributions, which is expected to be reclaimed and credited.
• If you have left employment, we have assumed no further contributions will be made to your account.
• If appropriate, contributions have been restricted to the scheme specific earnings cap - please see your plan documents or contact us to find out if this applies to you.

How your pension value will grow over time

• We have assumed your future contributions will be in the same fund(s) you hold now. Remember the estimated return you may get, depends on the type of fund you hold in your pension.​
• Until 9am on the 30 September 2023, we used the following estimated rates to show how different funds might grow (before adjustments for inflation):
  • 5% a year for equity and property funds​
  • 2.8% a year for bond funds​
  • 2.6% a year for cash funds​
• From 1 October 2023 the regulations will change to improve the calculation method across the industry, we will reflect these changes in your projections as of 9am on the 30 September 2023. The estimated growth rates used will depend on how much and how fast the value of a fund goes up and down over the past 5 years. This is known as volatility.  Where fund data is not available for the past 5 years, we have substituted another fund. The following estimated rates show how different funds might grow (before adjustments for inflation):
   

  Volatility of the fund	Volatility Group	Estimated Growth Rate
  0% to 5%	1	1% pa
  5% to 10%	2	3% pa
  10% to 15%	3	5% pa
  15% or more	4	7% pa

• Please note that this change may have an impact on the figures you see in the projections when compared to those shown before the change was made, including your projected pension pot, flexible income and guaranteed income.
• We have taken any charges that apply to your account into consideration.
• If you have invested some or all of your pension in a lifestyle strategy or Target Date Fund, the projection takes account of the gradual move of your investments from higher to lower risk funds as you approach retirement.
• The value of your investments may go down as well as up and you may not get back as much as you invest.

When you will retire and how much income you might need

• Under current legislation you cannot take an income from your pension until you are 55 (57 from 2028). For the purposes of this projection, we have used the retirement age in your Fidelity account details. 
• Although you are not obliged to take an income from your pension when you retire, we have assumed you will do so. 
• We assume you will need two-thirds (67%) of your pre-retirement income to maintain your lifestyle after you retire. This is because your expenses, such as commuting and buying work clothes, will go down, and you are likely to have other sources of income - for example, a State Pension. This is an assumption and may not reflect your particular circumstances.
• Because we show your pension fund value and possible monthly income in today’s prices, we do the same for your outgoings and base them on your current salary.

How your pension will provide you with an income

We have assumed you will not take a tax-free lump sum from your pension savings.

Guaranteed Income

• Guaranteed income means you will buy an annuity with your pension savings. This is an irreversible decision. While payments from an annuity are guaranteed, you will not benefit from any potential market growth.
• We assume that if you buy an annuity it will be paid monthly, in advance, for the rest of your life. We also assume you will receive the same level of income for the rest of your life. Until 9am on the 30 September 2023 we assumed this income would increase throughout your live in line with inflation, as measured by the Retail Price Index. This change was to align with regulation taking affect from the 1 October 2023 and the change may have affected the guaranteed income projection you see. 
• This projection is based on a gender-neutral annuity rate, rather than a male or female rate.
• The underlying annuity interest rate is -0.20% a year, in line with current illustration legislation. All firms use the same rates to illustrate how funds may be converted into pension income. 
• We assume the pension income will stop on your death and no income will be paid to your husband, wife or civil partner if you die. Until 9am on the 30 September 2023 we assumed your annuity would pay an income to your husband, wife or civil partner after your death. This payment was assumed to have been half the annuity you received. This change was to align with regulation taking affect from the 1 October 2023 and the change may have affected the guaranteed income projection you see. 
• In accordance with legislation, we have assumed a 4% deduction in the value of your annuity to cover expenses.
• We have assumed that if you die less than five years after you start taking your annuity, any payments you would have received by the end of the five years will be paid to your beneficiaries.

Please remember that any payments your annuity makes after your death will depend on the type of annuity you buy. Annuity rates may change by the time you buy an annuity. In addition, your circumstances may have altered. If this means you buy a different type of annuity, it is likely to pay you a different level of income.
 

Flexible Income

• Flexible Income means you will move your pension savings into drawdown, which is a way of using them to give you a regular retirement income. The value of your drawdown savings will vary depending on the performance of the funds you invest them in. The income you take from your drawdown savings isn’t guaranteed for life.

• This projection assumes your investments will grow at the same rate as prior to entering drawdown. The investments you actually choose may perform better or worse than the growth rate on which the projection is based. Please refer to “How your pension value will grow over time” which details regulatory changes which take affect from 1 October 2023. These changes may have affected the flexible income projection you see now.

• We have assumed your flexible income will not increase in line with inflation, meaning you will receive the same level of income every year.
• We have assumed you will live till you are 92, in line with mortality data provided by the Actuarial Profession’s Continuous Mortality Investigation, and that your flexible income needs to last this long. However, you should bear in mind that you may live longer than this, in which case there is a risk that your pension savings run out and can no longer give you an income.