New version of Statutory Money Purchase Illustration rules published
News types: Codes and Standards Announcements, Consultation Announcement
Published: 20 February 2014
PN 010/14 Following consultation the Financial Reporting Council (FRC) has today published a revised version of the standard that sets out how pension providers should treat statutory money purchase illustrations for members of pension schemes. The changes will enable providers to issue personalised statements that more closely reflect an individual pension holder’s circumstances.
Since 6 April 2003 members of money purchase pension schemes have received annual statutory money purchase illustrations (SMPI) showing the amount of future pension in “real terms” that might become payable to them under the scheme. The revised Actuarial Standard Technical Memorandum 1 (AS TM1) sets out the methods and assumptions to be used in statutory money purchase illustrations and reflects changes introduced by new disclosure regulations allowing pension providers to present more personalised illustrations to scheme members in their annual statements from 6 April 2014. The changes to AS TM1, enable providers to present illustrations which allow:
- cash lump sums to be taken out prior to the calculation of the illustrated pension;
- varying percentages of dependants’ pension to be assumed; and
- different levels of pension increases to be assumed.
Version 4.0 of AS TM1 is effective from 6 April 2014 and is available here.
Notes to editors:
- The FRC is responsible for promoting high quality corporate governance and reporting to foster investment. We set the UK Corporate Governance and Stewardship Codes as well as UK standards for accounting, auditing and actuarial work. We represent UK interests in international standard-setting. We also monitor and take action to promote the quality of corporate reporting and auditing. We operate independent disciplinary arrangements for accountants and actuaries; and oversee the regulatory activities of the accountancy and actuarial professional bodies.
- Since 6 April 2003, members of certain money purchase pension arrangements must be provided with Statutory Money Purchase Illustrations (SMPIs). SMPIs are produced in accordance with the Disclosure Regulations issued by the Department for Work and Pensions. Actuarial Standard Technical Memorandum 1: Statutory Money Purchase Illustrations (AS TM1), which is issued by the FRC, sets out the methods and assumptions to be used in producing SMPIs. The FRC reviews AS TM1 regularly.