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About the figures in your 2023 statement

How have my DC funds performed over the year?

You may have seen some investment losses in your 2023 pension statement. The year to 31 March 2023 was a challenging period for global investment markets – the impact of the Russia-Ukraine conflict continued to make itself felt, and heightened market volatility along with a significant rise in inflation had an impact on most markets.

In particular, assets that are traditionally seen as being less risky, like government and corporate bonds, have struggled as central banks increased interest rates to tackle inflation. UK government bonds, often called gilts, have been further impacted by the ‘mini-budget’ in September 2022 and the market volatility that followed. While all investments carry some element of risk, bonds are typically associated with lower risk compared with equities. This is why bonds play an increasing role in the mid-career and pre-retirement phases of DC lifestyle arrangements, like the Lifetime Pathway – the Fund’s default investment strategy.

Over the year to 31 March 2023, the Lifetime Pathway provided negative returns during the Growth, Consolidation and Pre-Retirement phases. While performance is in line with general investment markets, the Trustees recognise that the Lifetime Pathway’s recent performance isn’t meeting its inflation related targets. During times of high inflation, meeting these targets can be challenging.

Despite this, members in the Growth phase still experienced strong positive absolute performance* at 7.4% a year, measured over a five-year period. If you’re closer to retirement and in the Consolidation phase, returns are lower but still positive. And in the Pre-retirement phase, the focus on cash assets has supported members during this period of market volatility and moderated any under-performance seen in the Blended Assets fund.

It’s also important to remember that DC pensions are a long-term investment so, while it might be tempting to react quickly and switch investments, sudden dips are a normal part of long-term investing and markets can recover. At the time of writing, we’re starting to see inflation ease and an improvement in the performance of the Fund’s investments.

The Trustees continue to monitor the Fund’s investments closely, with support from their investment advisor – at the moment they’re working together to conduct a review of the Fund’s investment strategy. The Trustees will provide an update on the review as soon as it has been completed.

In the meantime, you can read more about how each fund has performed in the fund factsheets.

* Absolute performance is the gain or loss in the value of an investment over a specific period, without comparing it to any benchmark, or overall market performance.

Why is the value of my future pension from my DC account different from the value shown in my 2022 statement?

We’ve shown you the benefits that you might be able to get from your deferred DC account by assuming that you’ll convert it to a pension with an insurance company. This is known as an annuity. It’s important to remember that the cost of buying an annuity varies and is likely to change each year. You don’t have to convert your deferred DC account into an annuity, though.

Find out more about your options at retirement

When we work out the amount of pension you could buy with your DC account, we base our calculations on several things. These include:

  • How much we expect your DC account to be worth at your target retirement age, which is based on factors like:
    • when you expect to retire,
    • the savings you built up in your DC account while you were an active member of the Fund, and
    • future investment returns on your savings.
  • How much we expect it to cost to provide a pension from your DC account by using it to buy an annuity that guarantees you an income for the rest of your life.

This year, the value of your future pension from your DC savings may be higher than the value shown in your 2022 statement.

A key factor that has affected your estimated future DC pension this year is the very significant increases in long-term interest rates seen over the last year, particularly in September 2022.

This may have increased your estimated future DC pension in two ways:

  • We’ve assumed higher investment returns. The younger you are, the bigger the impact this has on the projected value of your DC account when you retire. This is because we’ve assumed that you’re likely to be benefitting from higher investment returns over a longer period.
  • We’ve estimated that you may be able to buy more pension with the same amount of money when you retire because annuity rates have improved. In the last year, rates have typically improved by around 40%. We base our projections on current rates, so this is likely to change and may not be the case when you come to buy an annuity.

Both your DC account and any future pension from it will also be impacted by how the account has grown – or fallen – over the year compared to the assumptions we used last year.

It’s also worth noting that the estimated future DC pension shown in your statement will be higher than the figures shown in your statutory money purchase illustration (SMPI), which you’ll find on page 5 of your pension statement. This is because the SMPI requires annuity rates to be based on financial conditions in February 2022. This means that the rates used for the statutory statement do not represent current market conditions and are therefore higher – more expensive – than the rates we used in your realistic statement on page 3.

How do I access my DC savings when I retire?

In your benefit statement, we’ve converted the projected value of your DC account when you retire into a pension. If you decide you’d like to access your DC account in this way, you’ll need to transfer it to an external annuity provider and buy an annuity product from them.

However, there are different ways to access your DC account when you retire. For example, you could choose an income drawdown arrangement instead. Again, you’d need to transfer your DC account to an external provider that offers drawdown products to do this.

Find out more about your options at retirement

Why are my statutory money purchase illustration (SMPI) figures different to my pension statement figures?

If you had a DC account balance at 31 March 2023, by law we must provide you with an SMPI as well as your pension statement. You can find your SMPI on page 5 of your pension statement.

Our specialist advisers have calculated the figures on page 3 of your pension statement with the aim of giving you a more realistic idea of how much pension you could receive. They use different, more up-to-date assumptions than the industry-standard assumptions we use to calculate your SMPI.

This year, the estimated value of the DC pension we’ve shown on page 3 of your statement is a lot higher than the estimated value of the DC pension we’ve shown in your SMPI on page 5.

In your SMPI, we have to use annuity rates based on financial conditions in February 2022 to project what your DC pension could be worth when you retire. However, in the estimate we’ve shown on page 3, we base annuity rates on market conditions at 31 March 2023, which is why the figures in on page 3 are often different, but more realistic.

We noted earlier that annuity rates have typically improved by around 40% in the past year. This has led to the significant differences in the projected DC pension figures you’ll find in your benefit statement and your SMPI.


You can find out more about the assumptions we used to estimate the figures on page 3 of your statement in the assumptions document we sent with it.

Still have questions?

The Pensions Team will be happy to help – you can get in touch using these contact details:

Write to:

Nestlé Pensions
1 City Place
United Kingdom