As of April 2002, product providers of money purchase schemes will have to annually issue members a ...
As of April 2002, product providers of money purchase schemes will have to annually issue members a projection of the value of the fund at retirement in addition to its current value.
In a consultation document from the DSS, the Government is proposing legislation that would create a standardised format for calculating the value of a money purchase scheme forward to the member's retirement. The projection would also apply to stakeholder pension schemes.
Stewart Ritchie, pensions director at Scottish Equitable, said money purchase schemes have, until now, only been required to provide historical information on the transactions that have happened in the pension scheme and its current worth.
This effectively left policyholders with the option of either seeking out their initial illustration supplied with the key features documents when they commenced the plan, or calling up the life office or an intermediary to request a forward projection of the pension's value at retirement age.
He said: "The Government want to make it easier for people to make sure that, whatever pension provision they have, they will be able to calculate it to have an overall view. It is long overdue that people be told in a standardised format so they can take their investment decisions more sensibly." The projection calculation has been devised by the Institute of Actuaries to show the value of the policyholder's scheme at their chosen retirement date and the pension those rights would provide.
Ritchie added that the next step would be a platform for informing individuals of the total value of all their pension provisions, especially those who may have moved jobs several times and may have been in a defined benefits, group scheme and personal pension with a possible Serps entitlement as well as the basic state benefit.
"Typically you would get a client asking their IFA to collate all their pension information to give them an idea of any shortfall in provisions but with the technical revolution we are always being told about, you would hope there will be a method to simplify the process in the near future," Ritchie said.
The format of the proposed future pension illustration would include a reference to the fund's current value and selected retirement date with a statement of the assumption that the policyholder will continue their contributions at a fixed amount.
The statement will show the estimated value of the fund on retirement at the policyholder's chosen date and what the fund would buy in an annual pension.
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