The regulator has said it will consult on developing inflation-adjusted point-of-sale illustrations for personal pensions.
Personal pension illustrations must make clearer the effects of inflation on pension pots, the Financial Services Authority (FSA) said in a policy statement today today.
The regulator said currently there is too much difference between point-of-sale key feature illustrations (KFIs) and annual statutory money purchase illustrations (SMPIs).
KFIs are in monetary terms whereas SMPIs are adjusted for inflation, providing a real-terms idea of retirement income, the FSA said.
However, KFIs are more personalised than SMPIs, which adds further confusion for investors, the regulator said.
Large firms with inflexible legacy systems could suffer high costs if either projection became subject to new rules but reform is still needed, the FSA insisted.
The regulator said it has drawn up revised KFI formats for consumer testing and will report on the results when it consults on KFIs next.
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