Annual statement illustrations

If you’ve received, or requested, an illustration with your annual statement you may have noticed changes to the way we calculate some of the figures. Here you will find information about these changes and what they mean for you.

An illustration gives you examples of what you might get back from your policy. In these illustrations, the growth rates we assume on your plan's investments are set by the Financial Conduct Authority - one of the UK's financial service industry regulators.

What changed?

There have been two main changes:

  • For both life* and pension policies the growth rates used to illustrate what you might get back from your policy have been amended.
  • For some pension policies, estimated values in illustrations are now shown in 'real terms'.

*A life policy which has a savings or investment element.

Growth rates

From 6 April 2014 regulation brought in by the Financial Conduct Authority required life and pension providers to change the growth rates used within illustrations.

These rates are used to work out the potential future value of your plan. The changes affected pensions and bonds, as well as life products which have an element of investment. Stocks and Shares ISAs were also affected.

You may have noticed, in your more recent illustrations, that the rates we use to show how your plan's investments could grow are lower than we used in the past. The changes in growth rates reflect the general reductions in returns from investment markets and lower expectations for the future. They are intended to provide you with a more realistic estimate of what your plan may be worth, which will mean your illustration should be more relevant to you, now and in the future.

It is important to remember that the change in growth rates has not affected the performance of the funds your plan has been invested in, and you have not lost money because of these changes as the figures are for illustration purposes only and your statements reflect the actual value of your investments.

You can see the maximum projection rates for the lower, medium and higher categories that we are now permitted to use in the table below, together with the old rates. These rates are relevant to the Financial Conduct Authority governed illustrations only and not to Statutory Money Purchase Illustrations (SMPIs).

Pensions and Stocks & Shares ISAs Header 1 All other business 2
Lower Medium Higher Lower Medium Higher
Old rate 5% 7% 9% 4% 6% 8%
New rate 2% 5% 8% 1.5% 4.5% 7.5

1 Tax advantaged products

2 Taxable products

Not all illustrations display all three rates; depending on your policy you may only see the lower and higher rates. In SMPIs (see below) you would only see the medium growth rate.

For some investment funds, we assume lower rates than the maximum. These reflect the lower returns expected from lower risk investments such as government bonds.

Statutory Money Purchase Illustrations (SMPIs)

Please note that SMPIs were not included in these changes. We issue SMPIs annually for many in force pension policies and the growth rates used in them are subject to rules produced by the Financial Reporting Council (FRC). The FRC is responsible for setting the standards framework within which auditors, actuaries and accountants operate in the UK.

'Real terms'

For some pension policies, we are now required to calculate the value of your plan at retirement in 'real terms'. This means the figures are adjusted to take account of estimated future inflation, giving you an idea of what your plan could be worth in today's terms.

The current inflation* rate adjustment of 2.5% when used with the growth rates will reduce the maximum growth rates we can use to -0.5%, 2.5% and 5.5% respectively.

* Inflation is defined as a sustained increase in the general level of prices for goods and services and is measured as an annual percentage increase. As inflation rises, the purchasing value of money reduces.

Why were these changes made?

Growth rates

The changes in growth rates reflect the general reductions in investment returns seen in recent years and expectations for the future. The new rates should give you a more realistic illustration to help you with your financial planning.

'Real terms'

Providing illustrations in 'real terms' gives a more realistic picture of the future value of a pension by taking into account the effects of inflation.

Many pension illustrations will use both the growth rates changes and the 'real terms' calculations together. However, in many other illustrations the growth rate changes will apply but the 'real terms' calculations won't.

Why did the rates change?

The changes were brought in to help customers have a better understanding of what their plan may provide in the future and to plan accordingly.

If you need to discuss these changes further you might want to talk to a financial adviser. If you do not have a financial adviser, you can find details of advisers in your area at You may be charged for any advice provided.

What does this mean for you?

The changes do not affect your policy, how it is invested, the charges, or what you will get back. The changes simply aim to give you a more realistic picture of what your plan might be worth in the future. The actual future value of your plan will depend on a number of factors including actual investment performance and the charges we deduct. For with-profits plans it will not be lower than any guaranteed minimum value.

In some cases you may choose to invest in funds which involve less investment risk. These funds will have lower expected growth rates and therefore a reduced chance of beating inflation. You may choose to take this lower risk approach at times of market turbulence or as you approach retirement.

Mortgage-linked Policies

If you have a savings plan where the premiums are designed to target a specified amount in the future, for example mortgage endowments, we use an assumption of future growth to assess the level of premium you should be paying.

Using a lower growth rate assumption will mean the illustration of your plan's potential benefits may be lower than in past illustrations. You may be able to increase the amount you are paying to reduce the likelihood of a shortfall in your future payout. Before changing your payments you should speak to a financial adviser. You may be charged for any advice provided.

Other policies

Some policies have regular reviews which are based on investment growth rates. While the changes do not affect the terms of your policy, how it is invested or the investment performance, they make it more likely that, as a result of a review, your premium will need to increase or we will need to reduce the level of cover to ensure that your policy lasts throughout its life.

If you need to discuss these changes further you might want to talk to a financial adviser. If you do not have a financial adviser, you can find details of advisers in your area at You may be charged for any advice provided.

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