Last month, a regulatory change to the Statutory Money Purchase Illustration came into force. This change aims to make pension projections more transparent, consistent and reliable, and help boost investors' confidence. You’re probably aware of the proposals, however, we wanted to make sure you knew all the details and what this means for your clients.
What’s new?
In October 2022, the Financial Reporting Council (FRC) announced changes to the Actuarial Standard Technical Memorandum 1 (AS TM1). This introduces a new volatility calculation to standardise the accumulation rate assumptions and improve the consistency in pension projections.
Overall, it should allow clients to plan for their retirement more effectively.
The difference is that it’ll include a volatility calculation for each investment. Each investment will be assigned one of four volatility groups. These volatility groups will derive the accumulation rates used in the SMPI.
The TM1: Statutory Money Purchase illustrations document gives more information.
How the volatility group derives the accumulation rates for the projection calculations: