How to read a pension statement

A pension statement can contain several values that look as though they should mean the same thing. They often do not. The easiest way through is to identify the pension type first, then separate today’s facts from future illustrations.

1. Identify the type of pension

A defined contribution pension normally has a pot invested in funds. Its statement may show a current value and a projected future value. A defined benefit pension normally promises an income calculated under scheme rules and may show an annual pension at a particular age.

Do not assume that a transfer value, fund value and projected retirement income are interchangeable. They answer different questions.

2. Circle the figures that describe today

• The statement date
• Current fund value or benefits built up
• Contributions paid during the period
• Any withdrawals or transfers
• Charges deducted

3. Put projections in a separate box

Projected values and incomes depend on assumptions. Look for the assumed retirement age, future contributions, investment growth, inflation and charges. A projection is useful for planning, but it is not guaranteed.

4. Look for special features

Search for words such as guarantee, protected, safeguarded benefit, guaranteed annuity rate, protected tax-free cash, exit charge or market value reduction. Ask the provider to explain any feature you do not understand before taking action.

5. Check the practical details

• Is your name and address correct?
• Is the selected retirement age still realistic?
• Is a beneficiary or expression-of-wish nomination recorded?
• Are expected employer and personal contributions shown?
• Does the provider list every charge?

Questions to ask the provider

1. Which figures are guaranteed and which are illustrations?
2. What total charges apply, including fund charges?
3. Are there any guarantees or protected benefits?
4. What assumptions are used in the projection?
5. Is any information missing or out of date?