Understanding Projected Growth Rates on Pensions and Investments
Published / Last Updated on 30/09/2025
Regulation of financial services was enacted by the Financial Services Act 1986 that came into force in 1988. At this point, two new regulators were formed:
- LAUTRO – Life Assurance and Unit Trust Regulatory Organisation (for insurance, pension, and investment companies).
- FIMBRA – Financial Intermediaries and Brokers Regulatory Authority (for brokers, advisers, and intermediaries).
At this point, a standard for producing projected growth and quote forecasts was established, with LAUTRO setting the rates that providers should use at Low Rate and Higher Rate of growth in addition to standardised provider initial charges, ongoing charges and commissions paid to intermediaries.
Over the years, LAUTRO and FIMBRA have been merged into one single regulator and morphed under different names as things change with mortgage regulation, compatibility with Europe etc.
Today the regular is now called the Financial Conduct Authority (FCA) and before that is was:
- LAUTRO and FIMBRA then
- Personal Investment Authority (PIA) then
- Financial Services Authority (FSA) and now
- Financial Conduct Authority (FCA).
It is the regulator that sets assumed annual growth rates and these have also changed over the years.
|
Period |
Pensions (and ISAs) LOW RATE pa |
Pensions (and ISAs) MID RATE pa |
Pensions (and ISAs) HIGH RATE pa |
Life Assurance/Inv. LOW RATE pa |
Life Assurance/Inv. MID RATE pa |
Life Assurance/Inv. HIGH RATE pa |
|
Late 1980s/Early 1990s |
7% pa |
N/A |
13% pa |
5% pa |
N/A |
11% pa |
|
Mid 90s – 2000s |
5% pa |
N/A |
9% pa |
4% pa |
N/A |
8% pa |
|
2000’s |
5% pa |
7% pa |
9% pa |
4% pa |
6% pa |
8% pa |
|
2012 onwards (also allow for provider own charges in projections) – but may be less for different funds |
2% pa |
5% pa |
8% pa |
1.5% pa |
4.5% pa |
7.5% pa |
|
2014 Extra Forecast Included with inflation adjustment* |
0.0%pa |
3.0% pa |
6.0% pa |
-0.5% pa |
2.5% pa |
5.5% pa |
* FCA mandated inflation adjustment to be assumed at 2.0% pa to try and reflect real future value spending power including the provider's own charges.
By using inflation and requiring providers to offer projections allowing for their own charge deductions, it was hoped to give consumers a better understanding of the likely future value of their pensions and savings.
Given stubborn inflation (currently at 3.8% pa), higher interest rates and higher performance, the basic projection less 2% pa inflation is more like a ‘make believe' story rather than the real thing so you should not rely solely on provider projections and forecasts, you should also make marginal adjustments yourself to allow for real inflation and real growth returns.
