Private pension rates are not fixed: a personal pension is invested, so growth varies and can be negative, and projections must use capped rates.
Anyone searching for a private pension rate usually wants one number to plan with. No such number exists, because what a personal pension earns depends on what it is invested in, and the value can fall as well as rise, so you may get back less than was paid in. What does exist is a set of published assumptions that firms must use when they show you a projection, and this guide sets out what those are, what they leave out and how to read them. Your own pot is a separate question; sending the form on this page carries no fee, and an FCA-authorised adviser firm would ring you to discuss it.
Does a private pension earn interest?
Not in the way a savings account does. GOV.UK explains that the provider invests the money you pay in, shares being one example, and that what you eventually get usually depends on how much went in, how the fund's investments performed (they can go up or down) and how you take the money. There is no declared yearly rate that the pot earns. The personal pension guide covers how the plan itself works.
What people call interest is investment growth. Growth builds on itself: a gain made early stays in the pot and can itself grow later, which is the compounding behind the projections below. The reverse also applies. A fall leaves less to grow from. MoneyHelper says a defined contribution pension can go down as well as up until the money is taken, because the outcome turns on what is paid in, how well the investments perform, the provider's charges and fees, and when and how you take the money.
One exception is worth knowing. Where a contract promises a minimum rate of return, the FCA's projection rules require that promised rate to replace the standard one in the projection. Whether a particular plan carries such a promise is in its own documents. The with-profits pensions guide covers one type of plan where this can arise.
The rates the FCA lets firms use in a projection
When a firm shows a projection for a personal pension, the growth rates it may use are set in the FCA Handbook, in COBS 13 Annex 2 (last updated 25 September 2026). The annex requires a projection to show benefits at a lower, an intermediate and a higher rate of return. Those are three cases, not three predictions: a low, a middle and a high one. The higher and lower rates sit 3% either side of the middle one, and each is capped. For personal and stakeholder pensions the table below gives the maximum growth rates and the price inflation rates the annex sets where inflation is taken into account:
| Lower | Intermediate | Higher | |
|---|---|---|---|
| Maximum growth rate a year, before inflation | 2% | 5% | 8% |
| Price inflation to be used (set rates, not maximums) | 0.00% | 2.00% | 4.00% |
Source: FCA Handbook, COBS 13 Annex 2, rules 2.3 and 2.5, read 20 October 2026.
A ceiling, not a default
The wording matters. Rule 2.3 says the intermediate rate "must accurately reflect the investment potential of each of the product’s underlying investment options" and that the rate for each investment option "must not exceed the following maximum rates". Read together, the table is a cap. A firm cannot use the table figure simply because it is in the table: it may use it only where that reflects the investments' potential, and never go above it. So a projection that uses the maximum is not the FCA saying that is what to expect, and one that uses less is not an error. The rates are chosen firm by firm and fund by fund, inside the cap.
Two more rules shape the result. The money is assumed to compound: contributions build up, after charges, at the chosen rate "compounded on an annual basis". And the charges have to be real ones. A projection must reflect all the charges, expenses and deductions that will, or may, be taken, and it "should not assume that charges will fall over time to a rate that is lower than the rate currently being charged". The pension charges guide explains what those charges are.
Today's money, and a lower rate on request
For a personal pension the result is shown in real terms, so the three figures are in today's money rather than future pounds, which is why they can look modest beside the growth rates in the table. A client may also ask for a projection at a lower rate than the firm chose. Which projections the annex covers, and how a provider's tool built on generic assumptions differs, is set out in the pensions forecast guide.
The statutory illustration on your annual statement
The yearly statement from a personal pension carries a different kind of figure. Schedule 6 to the Occupational and Personal Pension Schemes (Disclosure of Information) Regulations 2013 requires the retirement illustration to be worked out by reference to the relevant guidance plus a short list of assumptions. The statement must say that the illustration is not a promise or guarantee and that amounts are in today's prices. The Financial Reporting Council (FRC), appointed as the prescribed body, says its standard AS TM1 is that guidance. The current version, 5.2, applies to illustrations dated on or after 6 April 2026.
AS TM1 does not use one growth rate for everyone. It sorts each fund into one of four volatility groups, using five years of monthly returns, and gives each group a yearly accumulation rate:
| Volatility group | 1 | 2 | 3 | 4 |
|---|---|---|---|---|
| Accumulation rate a year | 2% | 4% | 6% | 7% |
Source: FRC, AS TM1 version 5.2 (February 2026), paragraph C.2.4. Group 1 is the least volatile funds and group 4 the most.
Three details change how to read the number. The rate applies "before the deduction of expenses or charges", so charges are dealt with as a separate step. Where a plan uses lifestyling, the standard assumes the fund switches happen at the ages the plan sets, so the rate changes as the retirement date approaches. And inflation is fixed: "The inflation rate must be 2.5% per annum compound", used to bring the final figure back into today's money. The FRC warns that the assumptions in this part are likely to be changed from time to time, so an older statement may not be built on the same rates as a newer one.
So the figure on a yearly statement and one in a provider's online account can differ simply because each rests on its own set of assumptions. The pension statement guide covers the rest of what a statement shows.
What MoneyHelper’s pension calculator assumes
MoneyHelper’s pension calculator lets you change your retirement age, your contributions and how much tax-free lump sum you take, and it produces a forecast of the income you are likely to get on retirement. The calculator’s own page, as archived on 6 August 2026, does not list the growth rate it uses. The assumptions are published instead in an algorithmic transparency record on GOV.UK dated 17 December 2024, which describes the tool as it then stood:
- pot growth of 5% a year, "simulating investment growth";
- pension charges of 0.75% a year taken from the pot;
- inflation of 2.5% a year, which reduces the real value of the pot and the expected income;
- contributions rising 2.5% a year "to reflect pay raises".
Because the record is from December 2024, the live tool may have changed since, and the record’s own State Pension figure is no longer the current one. Treat it as a dated description of how this calculator was built. The 5% growth setting is the same figure as the intermediate maximum in the FCA table above, but a calculator’s assumption is a modelling choice, not a view on what any fund will earn. The record itself calls the results "illustrative and not guaranteed outcomes". Which calculator to use, and what to check in each, is covered in the pension calculator guide; what a retirement may cost is in how much pension you need.
Different tools use different growth, charge and inflation settings, so two calculators given the same pot can return different answers. A calculator cannot test those settings against your own pot, but an FCA-authorised adviser firm can: that is what the enquiry on the form on this page would put to one.
How charges and inflation change the outcome
Two things sit between a growth rate and what lands in the pot: what the provider takes, and what the money will buy. Neither is visible in the headline rate. MoneyHelper says the provider usually takes charges straight out of the pot rather than sending a bill, that they are often a percentage of the pot, and that small differences over many years can add up to a big one.
To see the size of that, the working below uses only rates quoted earlier on this page. It is our own arithmetic, done on 20 October 2026, and it is an illustration of how the pieces interact, not a forecast of any pension. It takes £10,000 paid in once and left for 20 years, growth of 5% a year, a charge of 0.75% of the pot each year and inflation of 2.5% a year. The 5% is the calculator record's modelling setting and the FCA's intermediate cap, not an expected return.
| No charge | 0.75% a year charge | |
|---|---|---|
| Pot after 20 years, in future pounds | £26,533 | £22,824 |
| The same pots in today's prices (2.5% a year inflation) | £16,192 | £13,929 |
Source: our working, 20 October 2026. Steps: £10,000 x 1.05^20 = £26,533; £10,000 x (1.05 x 0.9925)^20 = £22,824; each divided by 1.025^20 (1.6386) for today's prices. Rounded to the nearest pound.
Two readings follow. In this example the charge takes about £3,709 over the 20 years, roughly 14% of the pot that would otherwise have been there. Inflation takes a far larger share of the apparent growth, which is the reason to read any projection in today's money, as both the FCA and FRC rules present it. The example assumes a single payment and a steady rate every year; a real pot gets neither, since returns arrive unevenly and payments are usually regular. The 0.75% is the figure used in the MoneyHelper record, not the charge on any particular plan. The tool for your own pot is the provider's charges document, set out in the pension charges guide.
Past performance and the investment warning
Searches for private pension returns or the average pension growth rate often lead to a quoted percentage for a fund or a year. Two cautions apply. The first is the one that runs through this whole page: the value of investments can fall as well as rise, and you may get back less than you paid in. A fall is part of how a pension invested in shares or similar assets behaves, and why a pension falls in value looks at it from that side.
The second is how past figures may be shown. FCA rule COBS 4.6.2R says that where a firm's information includes an indication of past performance it must cover the preceding five years, or the whole period if shorter, based on complete 12-month periods, and must carry a prominent warning that the figures refer to the past and are not a reliable indicator of future results. If a figure on an advert or a comparison page has no period, no source and no such warning beside it, treat it as incomplete. This page quotes no fund's return, names no fund as best and does not predict one. For a projection of a packaged product the FCA points firms back to the projection rules in COBS 13, which is why the three-rate format above appears on provider documents.
Where your own money sits matters more than any rate here. If you hold a SIPP, the investments inside it are your choice, and the SIPP guide explains how that works. Where a workplace scheme invests is a question for its documents.
Private pension rates: questions people ask
What interest rate does a personal pension pay?
None is declared. A personal pension is invested, and its growth is whatever the investments deliver after charges, which can be negative. The rates in the FCA and FRC tables are assumptions for projections.
What is a good growth rate for a pension?
None of the official sources used here sets a benchmark, and a figure from a past year says little about the next. The more useful questions are what the fund is invested in, what it costs and how long the money stays invested. The FCA caps the middle projection rate at 5% for personal pensions, but that is a limit on what firms may assume.
Do pensions grow with compound interest?
Projections assume they do: the FCA rules accumulate contributions at the chosen rate "compounded on an annual basis". Real pots do not move in a straight line, so the actual path will differ from any projection.
How much do private pensions grow each year on average?
The sources used for this page do not give an official average, so none is quoted. What they do give is the assumptions above, and a provider’s key features document and annual statement show the basis used for yours.
Why is my private pension value dropping?
Usually because the investments inside it have fallen in value, and charges continue to be taken. The guide to falling pension values goes through the causes and what to check.
What returns can I expect from a SIPP?
A SIPP is a type of personal pension, so the same projection rules apply, and the return depends on the investments you choose. The SIPP guide covers how one works.
What does a particular provider’s pension earn, such as Vanguard or Legal & General?
That depends on the fund, not the brand. The place to look is the provider’s own key features illustration and annual statement for your plan. Any past figures there should come with the warning described above.
Your next step
The projection on your statement shows one possible path for your pot, not a rate you can rely on. Whether that path suits you depends on your own numbers rather than these examples. Going through them is what the FCA-authorised adviser firm behind the form on this page would do by phone; nothing is charged for the enquiry.
Sources: FCA Handbook, COBS 13 Annex 2, COBS 13.5 and COBS 4.6 (read 20 October 2026); FRC, AS TM1 version 5.2 (PDF, February 2026); Occupational and Personal Pension Schemes (Disclosure of Information) Regulations 2013, Schedule 6, on legislation.gov.uk; GOV.UK, algorithmic transparency record for the MoneyHelper pension calculator (17 December 2024); MoneyHelper, pension calculator (archived 6 August 2026), checking your pension progress (archived 9 July 2026) and pension scheme charges (archived 19 August 2026); GOV.UK, personal pensions: your rights; our working, 20 October 2026. Assumptions and rules change, so check the current documents for your own plan.