As you contribute to your pension over time, it's important to keep an eye on how much your pot is worth - as well as what it could be in the future. In this article, we'll explain how to work out the value of your pension fund.
Every time you pay money into your pension, you're buying 'units' in your chosen pension fund. A unit is simply a small portion of ownership in the fund. The more units you have, the bigger your stake. The value of your pension is determined by the value of each fund unit and how many units you have. Unit valuations occur at regular intervals, often happening daily.
Here's a simple example. Let's say you add £500 to your pension at the end of the month. If we say each unit in your pension fund is worth £10 at the time of your contribution, you've just bought 50 units from your chosen pension fund. If the investments held in your pension fund perform well, the value of these units will grow. Based on a 4% growth, these same units are now worth £10.40. So next month, rather than having £500 in your pot, you'll have £520 - minus any management fees or charges.
Remember that with pensions, as with all investments, your capital is at risk. Your investment can go down as well as up.
The value of your pension comes from the number of fund units you have and the value of each unit.
Your pension provider should send you a statement each year which shows the current value of your pension pot. They should also remind you of which fund you’re invested in and may give you some information on the performance of the fund(s) over the last year.
If you want to try out some different scenarios, you can take advantage of our pension calculator to work out how much you'll need to save to fund a comfortable lifestyle when you're ready to stop working.
To check your pension fund performance with Penfold, all you need to do is sign in online or on our app. You can see your total pot, as well as any gains or losses, at the top of your dashboard. If you’d like to receive a printed PDF version of your pension performance, please get in touch with our customer service team.
The best way to keep an eye on your savings is your pension statement. As we outlined above, this is a summary of how your pension looks right now, normally sent out once a year. Every statement should show you:
This summary may also include an estimate of what your pot could reach in retirement - based on your current pot and regular contributions. It might include details of any fund switches or fees charged.
It’s worth remembering that these projections are only rough estimates that forecast fund performance and other variable factors. However, it can give you a useful snapshot of where you measure up currently against your savings goals.
For more on forecasting your future income, check out our guide on how much you should contribute into your pension.
Finally, your statement should also include a valuation of what your policy would be worth if you decided to transfer to a different pension provider. This is known as your "pension transfer value".
This figure is generally calculated by taking your current pension's value and deducting any charges not yet applied - including management charges or exit fees. See our article on how pensions work for more on pension fees.
Your pension transfer value should also reflect any potential reductions from selling the underlying investments in your fund prior to transferring. Don't worry, your pension provider will usually take care of this for you.