Pension statement terminology

[Familyman77]

Hi, excuse my naivety could anyone explain the terminology / difference in 4 lines on a statement from pension provider

1. Projected fund at retirement date
2. Projected pension at retirement date
3. The CURRENT VALUE of the projected fund
4. The CURRENT VALUE of the projected pension

Thanks

 

[kevhenry]

Every pension statement is different and each company uses a different set of ‘house’ assumptions but they all have to fall within general guidelines.

1. Projected fund at retirement date
This takes the current value of your pension fund today and compounds it forward at an assumed rate of annual growth (4%-6% usually) incorporating your time until retirement and whether you continue making contributions or not (and at what level).

2. Projected pension at retirement date
The future cash value of your pension is then converted into a pension income equivalent using an assumed annuity rate.

3. The CURRENT VALUE of the projected fund
The future cash value of your fund at retirement is discounted by a notional rate of inflation so you can get an idea of what it would be worth in today’s money.

4. The CURRENT VALUE of the projected pension
Similar to the above, the future projected pension income equivalent is discounted for inflation to give an idea of what it would be worth in today’s money

Kevin
www.thepensionstore.ie

 

[Familyman77]

Thanks Kevin. So the Current value is really the one to be watching more for me to comprehend what it's actually worth to me

 

[Steven Barrett]

All of the 4 values given to you are projections, so not actually real. 3 & 4 are what the future value is worth in today's money taking inflation into account i.e. €100 in 20 years time won't buy you the same as €100 today.

The most important thing to focus on is the value today and how much you are putting into your pension each year.

Steven
http://www.bluewaterfp.ie (www.bluewaterfp.ie)