Consultation on Actuarial Assumptions Used in Pension Scheme Projections
The FRC and FSA have published a joint consultation paper which sets out proposals to change the assumptions used in projections of the returns from financial products including pensions.
The FSA is proposing to reduce the intermediate projection rate for tax advantaged retail investment products such as personal pensions from 7% to 5%. The FRC is seeking views on whether the maximum projection rate used in Statutory Money Purchase Illustrations (SMPIs) should also be reduced from 7% pa to 5% pa or whether the maximum rate should be removed.
Commenting on the consultation, Jim Sutcliffe, Chairman of the FRC’s Board for Actuarial Standards, said: “Millions of people receive Statutory Money Purchase Illustrations every year. These illustrations contain important information about how much people have already saved towards their pensions and what they might receive at retirement. The assumptions used for future returns need to be justifiable and reasonable.”