The FRC has published a revised version of actuarial standard TM1 (AS TM1) which sets out the assumptions to be used in annual statutory money purchase pension illustrations (SMPIs).
The most significant change to AS TM1 is the removal of the cap of 7 per cent pa on the rate at which pension scheme investments are assumed to build up. Insurance companies and other providers will have to make justifiable assumptions about the investment returns that can be achieved taking account of the nature of members’ investments. The FRC will monitor the assumptions used in SMPIs to assess the impact of the removal of the cap.
Commenting on the revision, Olivia Dickson, Chairman of the FRC’s Actuarial Council, said: “Statutory Money Purchase Illustrations provide millions of people with important information about how their pension schemes are progressing. Providers must think very carefully about the assumptions they use in producing these illustrations. The assumptions on future investment returns need to be justifiable and providers should be ready to explain to members how they chose these assumptions.”
Press release
© FRC
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