Changes required by the FSA's CP134 will cost more than three times as much as currently estimated, ...
Changes required by the FSA's CP134 will cost more than three times as much as currently estimated, pensions software specialist Dunstan Thomas says.
This means it deems the industry's own current £22m figure as completely unrealistic.
CP134 will force providers to give policyholder much more precise projections of pension values.
Many would-be pensioners are likely to be frightened as the estimated value of their pensions and annuities will drop quite notably, Dunstan Thomas adds.
The new statutory illustrations must use more accurate interest rate levels so that intermediate/middle rates quoted will be closer to current interest rates, on average dropping from 6% to 4.8%.
The quoted rates will also need to shaddow the base rate more closely, and can no longer remain static numbers as has been the case.
Age will be more closely watched as expected death rates based on rising national or regional averages will also have to be re-calculated.
A customer's date of birth as well as preferred retirement age will also be included for a more exact estimate of how much will be paid in pre-retirement.
The illustrations will also take into account the fact that a policy holder's surviving spouse will only get half of the amount of the annuity in case of the scheme holder's death.
"All these changes individually seem small, but taken together they make a significant dent in the projected value of most people's pensions. From last month these new statements will make alarming reading to pension holders who are, at this stage in the economic cycle, least able to increase contributions," says Chris Read, chairman of Dunstan Thomas.
"Providers need to be prepared for a fairly large torrent of abuse into their customer servicing departments, and IFAs will also be taking calls."
However, there is a light at the end of the tunnel, says Dunstan Thomas, because specialist technology providers like itself can give quick advice to providers and IFAs.
"The technology is there but the real question is have providers and IFA firms, with all the other changes going on across the industry, got the time to call in the experts to get the job done? While they decide, there is a real risk that the SMPIs people pick up off their doormats in the coming months will be non-compliant, and worse, remain confusing and unhelpful to those reading them," Read concludes.
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