Important Information

• These figures are only illustrative.
• You may also have other sources of income which you are considering using for your retirement.
• This illustration shows, in today's prices, the pension that might be payable on retirement. This means that we have allowed for future inflation to give an indication of how much someone might be able to buy with a pension if it were payable today.
• Currently, the State Pension Age for men is 65. On 6 April 2010, the State Pension Age for women started to increase gradually from 60 to 65, to match men's. The Government has announced new proposals for increasing the State Pension Age if you were born between 6 April 1953 and 5 April 1960. The proposal would mean women's State Pension Age would increase more quickly to 65 between April 2016 and November 2018. From December 2018 the State Pension Age for both men and women would start to increase to reach 66 by April 2020. The Government is also considering the timetable for future increases to the State Pension Age from 66 to 68. Any change to the timetable needs the approval of Parliament. The tool reflects the Governments proposals regarding changes to the State Pension Age.
• If retirement is earlier than the assumed State Pension Age, your projected income on retiral will not include Basic State Pension.
• If retirement is earlier than the age the pension income entered on the Pension Income page starts then your projected income on retiral will not include that pension income.
• The value of investments can vary from this illustration. As such, these figures are not guaranteed.
• These figures do not take into account any tax that might be incurred if the fund(s) in the pension plan(s) exceeds the Lifetime Allowance. More information can be found in the Tax section below.
• All firms use the same rates to show how funds may be converted into pension income.
• The minimum required to be paid towards a pension may be determined by the product rules of that pension, or by your employer for company pensions. There is generally no maximum payment, however there are tax implications as described below of paying more than an amount set by HM Revenue & Customs in a tax year or accumulating more than the Lifetime Allowance in total across all your pension funds.

Tax

The Government changed the tax regime for pension on 6 April 2006. In the new regime the maximum permitted payment you can make to a pension which is eligible for tax relief is the greater of your relevant UK earnings (annual salary) subject to the Annual Allowance or £3,600 each year. These limits are set by HM Revenue and Customs and apply to the total payments made by you and any third party (including your employer) to all your pension arrangements.

There is also an Annual Allowance for tax relief on payments that you, your employer and any third party can make to all pension arrangements. The Annual Allowance for the tax year 2011/12 is set at £50,000. Payments above the Annual Allowance may be subject to a tax charge (depending on previous years pension payments) at an individual's marginal tax rate.

There is also a Lifetime Allowance on the total pension funds that can be used to provide benefits to you. The Lifetime Allowance for the tax year 2011/12 remains at £1.8 million, but will decrease to £1.5 million with effect from 6 April 2012. Payments from a fund(s) in excess of the Lifetime Allowance may be subject to a tax charge.

Tax rules and legislation may change. The value of tax relief may change and will depend on your financial circumstances. The information we have given is based on our understanding of law and HM Revenue & Customs practice at 6 April 2011.

Assumptions

• The illustrations assume an annual growth rate of 7% and an annual management charge of 1%. A higher (or lower) annual management charge may apply depending on the actual funds your pension is invested in. In this case, your projected income would be lower (or higher) than the figure shown here.
• When determining the values in today's terms, inflation in the Retail Prices Index is 2.5% each year.
• Payments into this plan are assumed to increase at 4% each year. Salary escalation is assumed to take place 12 months from today and therefore the pension projection may be underestimated if there is a salary increase before the end of this 12 month period.
• The first pension payment will be paid on the birthday during the year of retirement and will be paid every month from this date until death.
• The pension will alter in line with the Retail Prices Index each year from the time it starts. We have assumed the Retail Prices Index will increase by 2.5% each year.
• We have assumed you are currently exactly six months older than the age entered. This may overstate the pension projection by assuming more monthly payments than actually made and more growth.
• On retirement, you'll be married (if you are in a civil partnership or single the projected income is likely to be different) to someone three years younger than you (if you are male) or to someone three years older than you (if you are female).
• Your spouse will get half your pension after you die.
• We have assumed a single person's allowance for the Basic State Pension on the basis that your spouse is entitled to a full Basic State Pension in their own right. If this is not the case and you are entitled to the full married couple's Basic State Pension, your State Pension would be higher by £3,182.40 (for tax year 2011/12) each year.
• Where Basic State Pension is included, we have assumed you have 30 qualifying years for a full Basic State Pension. We have assumed that the Basic State Pension is altered in line with the Retail Prices Index in each future year.
• We have assumed that any Defined Benefit pension income changes once in payment are in line with the Retail Prices Index.
• We have assumed that:
  • you have no taxable income at retirement other than the total projected income;
  • you are eligible for the standard single person's personal allowance for your retirement age, but not eligible for any other income tax allowances;
  • personal allowances and tax rate thresholds increase each tax year from 2011/12 in line with inflation in the Retail Prices Index.