UK - The Financial Services Authority (FSA) is having to change to its rules on pension projections in light of the Government initiative to provide consumers with a statutory money purchase illustration (SMPI).
From April 2003, pension firms will be required to give yearly illustrations of their money purchase pensions benefits. This must be a ‘real projection’, meaning it is in today’s prices. The idea is that real projections will better illustrate whether a pension plan, at the current rate of contribution, will provide sufficient income in retirement.
Currently, the FSA’s rules requires firms to show three monetary projections, on a low, intermediate and high basis. The Association proposes that a real projection is also given in the key features document (KFD) that consumers receive when purchasing a pension. The change in rules would ensure that information on pensions given each year in the SMPI is consistent with what is given ton the initial investment, said the FSA.
The FSA added that it would also need to take into account improving mortality trends, current low long-term interest rates and reforms to the State pensions.
By Madhu Kalia
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