The values in your pension estimate don’t guarantee the amount that’s in your future retirement pot or the amount of income you’ll get when you take your money out of NEST.
These are estimates only and what you get at retirement could be more or less than the value shown.
All values have been calculated in terms of today’s money. This is to give you an idea of how much you’d be able to buy with your retirement income if you got it today.
The amount of retirement income will depend on the interest rates and the cost of buying it at the time you retire.
This is how we’ve estimated the amount you might get when you take your money out of NEST:
- contributions from you, your employer and any tax relief will increase in line with inflation in the future
- you’re a basic rate tax payer and you’ll get basic rate tax relief on your contributions
- all your contributions are invested in a NEST Retirement Date Fund that’s in line with your NEST retirement date
- annual contributions stay under a contribution limit. For the tax year 2015/16 this limit is £4,700. This figure will be adjusted annually in line with changes to average earnings
- NEST’s contribution charge of 1.8 per cent is made on all your future contributions. This includes your employer’s contributions and tax relief
- each year NEST’s annual management charge (AMC) of 0.3 per cent is taken off your NEST retirement pot
- at retirement, you’ll purchase an income for life from a retirement income provider
- your retirement income is paid to you by the provider at the end of each month
- your retirement pot will grow as fast as inflation and all NEST charges. On top of this your pot will grow between 2 per cent and 3 per cent per year on average. The exact amount depends how far you are from retirement. This is in line with the objectives of NEST Retirement Date Funds. If you’re very close to retirement the growth figure will be lower
- the inflation rate is 2.5 per cent a year
- the cost of getting an income from a retirement income provider is based on assumptions about the interest rate and life expectancy the provider may use when you retire:
- an interest rate of 3.7 per cent per year for a retirement income that doesn’t increase with inflation
- an interest rate of 0.2 per cent per year for a retirement income that increases each year with inflation
Please note that this estimate doesn’t allow for:
- the impact of what’s known as ‘above inflation increases’ on your wages or salary. An example of this would be a pay rise or promotion during your career which might increase the amount contributed to your NEST retirement pot
- the impact of tax on your future NEST investments and retirement income. For example, the illustration doesn’t allow for income tax on your retirement income or the ‘lifetime allowance’
- the impact of future changes in UK pensions and investment legislation on your NEST investment
- your own circumstances that might affect the way a retirement income provider works out your retirement income. For instance they might look at your state of health, where you live and whether you smoke. This might increase or decrease the amount of retirement income you get
Since 2012, UK retirement income providers have had to give men and women the same rates for their retirement income. This estimate takes this provision into account.
We’ll review all these assumptions and we may update them from time to time.