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<p /> <p>Since 6 April 2003, certain money purchase pension arrangements have been
required to provide members with Statutory Money Purchase Illustrations (SMPIs). Legislation
requires that statutory illustrations are produced in accordance with guidance prepared
by a prescribed body approved by the Secretary of State for Work and Pensions and
by the Department for Social Development in Northern Ireland.</p><p>The Financial
Reporting Council (FRC) is the prescribed body and has been since 6 April 2007. The
FRC fulfils its obligations through the publication of Actuarial Standard Technical
Memorandum AS TM1: Statutory Money Purchase Illustrations (AS TM1). It reviews AS
TM1 regularly and the last completed review was carried out in 2013 following the
introduction of the Occupational and Personal Pension Schemes (Disclosure of Information)
Regulations 2013 (SI 2013/2734) which came into force on 6 April 2014. The AS TM1
specifies that the investment return should take into account the current and anticipated
future investment strategy of the member’s funds over the period to retirement and
be consistent from year to year, with the rationale documented and made available
to members on request.</p><p> </p><p>In addition, Financial Conduct Authority (FCA)
rules require a projection at point of sale for contract based pensions. The investment
return must reflect the investment potential of the (expected) underlying assets,
subject to an overall cap of 5%pa. Flanking projections must be provided using returns
which vary by +/- 3%. The FCA has a public commitment to review the basis every 4
years and the next review is due in 2015. The FCA do not require further projections
during the lifetime of the contract as pension scheme members will receive statutory
statements prepared under DWP legislation. However, where a provider chooses to provide
additional projections, they must follow the same basis as point of sale projections.</p>
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