Reasonable projection calculation

B

birdman

Registered User
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Can anyone help me with the underlying calculations in the Statement of Reasonable(!) Projection that I received from my PRSA provider.

The results from my calculations do not concur with the statement values.

Policy value 'x'.
Contribution amount 'y' - paid at the start of the yearly term
Assumed growth 6%.

I would have expected the policy value (without charges) after year 1 to be (x + y) * 1.06.

It's not. It's lower.

If I factor in the allocation rate of 95% to 'y', I get a figure which is closer but still larger than the stated policy value. It's not inspiring confidence.

The value quoted after charges have been applied shows an even bigger discrepancy.

Any help appreciated.
 
If it's a Standard PRSA, the annual management charge is presumably 1%, so your calculation would be (x+(y x 95%)) x 1.05.
 
Thanks for the response folks but I am trying to work out where they got their figure for 'policy value if no account is taken of applicable charges'. [Afaik, this is one of the defined columns that has to be in the Table of Benefits according to the legislation.]

However I had tried adding in the 1% charge to see if it equated to any of their quoted values (with or without charges) and it doesn't.

Any other angles/ideas?
 
ClubMan said:
You mean x 1.06 I presume?
Click to expand...

No, assuming 6% growth and 1% annual management charge, the net effect would be 1.05.

That said, as the poster has subsequently clarified that s/he's looking at the projections before charges, this is now irrelevant.
 
Update ... I've made some progress although there is still a discrepancy. I think that I'll have to talk to the pensions board as suggested.

It turns out that annual payment is considered to be paid at the end of the year so the formula becomes (X * 1.06) + y. This is not clear from the statement document. The calculated figure is closer to but not exactly the quoted figure. When I extrapolate it to 20+ years of investment, the figures diverge quite a lot, as do the figures that have costs included. Not there yet...
 
You could also try to get to speak to the actuarial team of the PRSA provider - one of them should be able to tell you the basis for calculations that was used on your statement.
 
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