MPs have approved rules governing annual Statutory Money Purchase Illustrations (SMPI), which requir...
MPs have approved rules governing annual Statutory Money Purchase Illustrations (SMPI), which require life offices and advisers to explain in real terms what an individual should receive at retirement.
Unveiled last week by Ian McCartney, pensions minister, the regulations will set out in simple language what a pension pot is likely to be worth at retirement, how it has been calculated, and what it is worth at the moment.
The changes, to be introduced in April 2003, require projections to be calculated using a single growth rate rather than the upper/middle/lower range used by the FSA.
Under the rules, created by the members of the Institute of Actuaries' SMPI working party and the Department for Work and Pensions, all calculations will assume pensioners will take an RPI-linked annuity at retirement, with 22% assumed tax relief for each individual and growth on the fund at 7% per annum. Annual management charges are assumed to be 1% for pensions and an upfront 4% on annuity purchase.
Members of all money purchase occupational schemes, stakeholder pension schemes and personal pension schemes will receive annual illustrations of what their future pension might be to give them an idea of the spending power of their pension and what it is worth today.
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