The projections that Irish Life provides to its plan members and policyholders are governed by guidance issued by the Society of Actuaries in Ireland and the Pensions Authority. As you may be aware, this guidance is due to change on the 1 January 2025 which will result in changes to illustrations of projected benefits.
What’s changing
The key assumptions used in a projection of pension benefits are:
- Inflation
- Investment growth
- Annuity escalation
- Annuity discount rate
Below is a table summarising the assumptions changes on the 01/01/2025:
Old | New | ||
Investment Growth | Maximum Investment growth - overall | 5.75% | 6.00% |
| Maximum Investment growth - equity & property | 5.75% | 6.65% | |
| Maximum Investment growth - fixed interest | 2.50% | 3.40% | |
| Maximum Investment growth - cash | 0.25% | 2.65% | |
| Maximum Investment growth - other assets with insufficient information | 0.25% | 2.65% | |
Inflation | Salary inflation rate or benefit deflation rate | 3.00% | 3.00% |
| Premium increases linked to general earnings | 3.00% | 3.00% | |
| Premium increases linked to consumer prices | 2.00% | 2.00% | |
Annuity discount | Maximum interest rate for annuities | 2.00% | 2.90% |
Annuity Escalation | Rate of escalation for annuities | 2.00% | 2.00% |
Implementation
Irish Life will implement these changes on 01 January 2025.
What is the impact of the change?
The changes in the investment growth rate assumptions will result in higher projected fund values in future.
The projected monthly income for life that the projected fund value is estimated to secure will increase as the changes to rates associated with annuities will mean that future annuity costs are reduced.
Please note that any projections of the fund or a future monthly income for life are not guaranteed. The actual value of your retirement fund at normal retirement date will depend on the amount of contributions paid and the actual performance of the underlying fund assets. The income that may be purchased with your retirement fund at normal retirement date, will depend on a number of factors, including the level of interest rates at that time.
The degree to which these changes will have an impact on the illustration of projected benefits/income will depend on an individual’s own circumstances.
