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Growth rates used in illustrations

Calculating potential future value

The Financial Conduct Authority (FCA) tells investment, life and pension providers how they must calculate the potential future value of life assurance, pension and investment accounts for use in illustrations.

Because future investment returns are uncertain, we generally use three scenarios of projected growth; high, mid and low. The FCA sets the maximum percentages to be used. From 6 April 2014 these have reduced:

  • for pensions and ISAs
    from 5%, 7% and 9%
    to 2%, 5% and 8% per year
  • for other investments
    from 4%, 6% and 8%
    to 1.5%, 4.5% and 7.5% per year


Fund-specific growth rates

The FCA had previously stated that these rates must be adjusted to lower rates if we think that standard rates could overstate the potential growth of any of the funds held in a particular investment. These rates are known as ‘fund-specific’ growth rates and they are used to ensure the projections are realistic.


Table of fund-specific growth rates

The table below shows the fund-specific growth rates we use. Each fund is allocated a fund type from A to G based on the type of assets held by the fund at a fixed point in time. The type determines the growth rates used in the calculations for that fund.

Fund type Typical holding CIA and Life products ISA and Pension products
    Low Mid High Low Mid High
Type A Cash deposit Only applicable to ISA and CIA -2.75% 0.25% 3.25% -2.25% 0.75% 3.75%
Type B Cash Mainly cash/money markets or combined cash/money markets and fixed interest -2.50% 0.50% 3.50% -2.00% 1.00% 4.00%
Type C Fixed interest Mainly fixed interest -2.00% 1.00% 4.00% -1.50% 1.50% 4.50%
Type D Low mixed Mixed holdings with at least half in cash/money markets and/or fixed interest -0.75% 2.25% 5.25% -0.25% 2.75% 5.75%
Type E High mixed Mixed holdings with less than half in cash/money markets and/or fixed interest 0.50% 3.50% 6.50% 1.00% 4.00% 7.00%
Type F Equity Mainly equities 1.50% 4.50% 7.50% 2.00% 5.00% 8.00%
Type G Property Mainly direct holdings in property 0.00% 3.00% 6.00% 0.50% 3.50% 6.50%

The projections for each fund in a plan, account or bond are calculated using the relevant fund-specific rates. These are then totalled to provide the combined projection for each of the low, mid and high growth scenarios. We also show an equivalent growth rate for each of the three scenarios on the illustration for information.

The low, mid and high growth rates used in the above table are worked out using research data provided by an independent company. They are not guaranteed and they are not minimum or maximum rates. We review growth rates each quarter and fund classifications each year.


To illustrate the potential future growth of a £10,000 investment in a CIA, with 60% into an equity fund (type F) and 40% into a fixed interest fund (type C), we would calculate as follows:

Growth rate Fund
Low growth rate: Equity Fund £6,000 growing at 1.50% a year
Fixed Interest Fund £4,000 growing at -2.00% a year
Mid growth rate: Equity Fund £6,000 growing at 4.50% a year
Fixed Interest Fund £4,000 growing at 1.00% a year
High growth rate: Equity Fund £6,000 growing at 7.50% a year
Fixed Interest Fund £4,000 growing at 4.00% a year

The rates used in the above example are before charges have been deducted.