Pension Illustrations and Retirement Income Forecast Changes 1st October

Your yearly pension statement and projections to retirement age are governed Statutory Money Purchase Illustrations (SMPI).  These are a set of rules that pension companies are required to abide by when they issue you with pension statements and forecasts included estimated retirement income.

SMPI rules are set by the Financial Reporting Council and these change on 1^st October 2023.  Frome this date, pension providers must change how their illustrations are calculated.

• Biggest Change:  Projected value of your fund must now be calculated based upon the actual volatility of your investment funds.  It is not a simple assumption of 5% pa growth less a 1% pa fund management charge.
• No Effect: On your actual fund value or the benefit paid to you, it is merely a change to how the future values are forecasted.
• What is Affected?  Assumed growth rate, projected future plan value, projected annuity income, projected tax-free cash lump sums and projected pension income or drawdown from the balance.

Comment

Some pension providers have removed the tax-free cash lump sum projection from their annual statements, others have not.  We assume this is due to system restrictions on those that have removed lump sum calculations.

We suggest that new annual benefits statements usual actual fund performance and volatility for each fund will give people a more accurate projection of the likely fund values and income potential in retirement.