Market Depreciation Discounts
If the assets of the Pension Assured Fund are not performing well, the value of each unit is reduced. When this happens, bonus units are usually reduced by more per unit than basic units. The Market Depreciation Discount factor by which units may be reduced, is decided by Aviva and changes each month. Historic Market Depreciation Discount factors for the fund are also available. See Quick Links - Discount Factors for more information.
Example
Based on a member having 80 basic units and 20 bonus units, the following example shows the value of these units at March 2009, based on actual Market Depreciation Discount Factors and how the reduction is applied;
80 basic units x 0.369 = £29.52 reduction to the value of the basic units.
If units are normally a £1 each this means that this member’s basic units would actually be worth 80 x £1 = £80.00 less £29.52, which is £50.48.
20 bonus units x 0.481 = £9.62 reduction to the value of the bonus units.
If units are normally a £1 each this means that this member’s bonus units would actually be worth 20 x £1 = £20.00 less £9.62, which is £10.38.
The table below shows the actual Market Depreciation Discount Factors for someone age 35 throughout the year;
|
March 2009 MDD |
June 2009 MDD |
September 2009 MDD |
| Basic units |
0.369 |
0.291 |
0.00 |
| Bonus units |
0.481 |
0.472 |
0.415 |