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Feedback Statement and Impact Assessment - AS TM1: Statutory Money Purchase Illustrations (February 2026)
The FRC does not accept any liability to any party for any loss, damage or costs howsoever arising, whether directly or indirectly, whether in contract, tort or otherwise from any action or decision taken (or not taken) as a result of any person relying on or otherwise using this document or arising from any omission from it.
The Financial Reporting Council Limited 2026 The Financial Reporting Council Limited is a company limited by guarantee. Registered in England number 2486368. Registered Office: 13th Floor, 1 Harbour Exchange Square, London E14 9GE
1. Executive Summary
1The Financial Reporting Council (FRC) consulted in November 2025 on not making any amendments to the volatility boundaries, accumulation rates or other assumptions set out in Actuarial Standard Technical Memorandum 1 ('AS TM1') v5.1 based on a review of market conditions as at 30 September 2025, and proposed a minor amendment in the wording of paragraphs C.2.8 and C.2.12 to clarify policy intention in relation to calculation of volatility.
2The FRC received ten written responses to our consultation, which were from a mixture of pension consultancies, professional service firms, industry bodies and pension providers. This executive summary draws out the key areas in which feedback was provided.
Conclusion on consulted areas
3Most respondents either agreed with our proposal not to amend the accumulation rates or associated volatility boundaries in AS TM1 v5.1 or were supportive of maintaining stability/consistency in the assumptions and did not suggest alternative accumulation rates and/or volatility boundaries. Most respondents also agreed with our proposal not to amend any of the non-accumulation rate assumptions. The FRC has therefore finalised this proposal not to amend the assumptions in AS TM1.
4Most feedback was supportive of amending the wording of paragraphs C.2.8 and C.2.12 as proposed. The FRC has therefore published AS TM1 v5.2 in line with the proposed wording amendments, with effect for illustration dates on or after 6 April 2026.
Other areas of feedback
5Some respondents commented on known limitations of the use of volatility groups to determine accumulation rates for defined contribution investments, for example highlighting that certain funds, including index-linked gilt funds, could be in volatility group 4 but this was not representative of reasonable long-term expected returns for these funds. Several respondents commented on other aspects of the volatility-based approach used for determining accumulation rates within AS TM1. The FRC addressed the issue with regard to index-linked gilt funds in the feedback statement published in February 2025. The consideration of these issues is outside the scope of the annual review and the FRC will consider them when conducting the next periodic review of AS TM1 where methodology is in scope.
2. Introduction and background
1The FRC is the UK's independent regulator responsible for issuing and maintaining actuarial standards. The FRC keeps the Technical Actuarial Standards and other actuarial standards under regular review.
2Since 6 April 2003 money purchase pension arrangements have been required to provide members with Statutory Money Purchase Illustrations (SMPIs). These illustrations are governed by the Occupational and Personal Pension Schemes (Disclosure of Information) Regulations 2013 as amended. Legislation requires that statutory illustrations be produced in accordance with guidance prepared by a prescribed body approved by the Secretary of State for Work and Pensions and by the Department for Social Development in Northern Ireland.
3The FRC has been the prescribed body since 6 April 2007 and fulfils its obligations through the publication of Actuarial Standard Technical Memorandum 1: Statutory Money Purchase Illustrations (AS TM1). AS TM1 specifies the assumptions and methods to be used in the calculation of statutory illustrations of money purchase pensions, also known as defined contribution pensions.
4Providers' point of sale and ad hoc projections are subject to the assumptions set within COBS 13 issued by the FCA.
5Following publication of AS TM1 v5.0 in October 2022, in the accompanying feedback statement, the FRC noted its intention to review the appropriateness of accumulation rate assumptions and volatility group boundaries annually based on 30 September data.
6The FRC issued a Consultation paper in October 2025 to propose no amendments to AS TM1 v5.1, based on a review of market conditions as at 30 September 2025 and to propose a minor wording amendment relating to fund volatility calculation dates. Alongside this, the FRC published a technical analysis underlying this proposal. The consultation closed on 1 December 2025. This paper provides a summary of the feedback received and sets out the FRC's response.
3. Summary of Responses
Responses to the public consultation
1The FRC received ten written responses, which have been published on the FRC website. The table summarises the number of responses by respondent type and a list of respondents is set out in Appendix 1.
| Category of Respondent | Number |
|---|---|
| Industry bodies | 3 |
| Consultancies / professional services firms | 5 |
| Pension providers | 2 |
| Total | 10 |
2In this section we summarise the points raised in written submissions and provide comment on the FRC's position.
Question 1
Do you agree with the FRC's proposal not to amend the volatility boundaries and accumulation rates in AS TM1 v5.1 at this annual review? If not, what alternative volatility boundaries and accumulation rates do you consider to be more appropriate? Please provide supporting evidence for any alternative view including whether you consider adopting alternative assumptions will incur substantial administrative costs.
3All ten respondents answered this question. Six of these agreed with our proposal not to amend the accumulation rates in AS TM1 v5.1 (including the associated volatility group boundaries). Three other respondents were supportive of maintaining stability/consistency in the assumptions and did not suggest alternative accumulation rates and/or volatility boundaries, but did suggest areas for wider change or consideration in AS TM1 which are outside of the scope of this review. These are discussed later in this document.
4One respondent disagreed with our proposal, suggesting that the accumulation rates may understate returns on higher risk investments. They suggested the illustrations under AS TM1 assumptions should also be compared to historical equity index returns.
FRC response
5As the majority of responses are supportive of the proposal, the FRC has not made amendments to the accumulation rates assumptions in AS TM1.
Question 2
Do you agree with the FRC's proposal not to amend any of the non-accumulation rate assumptions? If you think they should change, what changes do you consider appropriate? Please provide supporting evidence for any alternative view.
6Ten respondents answered this question. Nine of these agreed with the proposal not to amend any of the non-accumulation rate assumptions.
7One respondent considered that the assumed inflation rate did not provide a realistic estimate of future inflation rates and suggested the replacement of the assumed inflation rate with realised historical inflation rates.
8As for question 1, several respondents in their response to this question suggested areas for wider change or consideration in AS TM1 which are outside of the scope of this annual review. These are discussed later in this document.
FRC response
9As most responses are supportive of the proposal, the FRC has not made amendments to any of the non-accumulation rate assumptions in AS TM1.
Question 3
If you prepare SMPIs, would the proposed changes outlined above require changes to your calculation systems?
Question 4
Do you agree with the FRC's proposal to amend the wording in paragraphs C.2.8 and C.2.12 as described above? Do you agree the proposed effective date for AS TM1 v5.2 would provide sufficient time to make the necessary calculation process changes? If not, please explain your reasons.
10Eight respondents answered question 3. Seven said they would require little or no system changes to implement the proposed changes, while one stated that some changes would be required to their calculation systems.
11The one respondent requiring system changes did not have cost estimates available but confirmed in their response to question 4 that the implementation date should allow them to manage the changes required.
12One respondent suggested that guidance on implementing the change for schemes that have adopted other approaches would be helpful.
13Ten respondents answered question 4. Nine of these agreed, while the other did not say whether they agreed or disagreed but commented that the proposed timeframe should allow them to make the required changes.
14One respondent that agreed with the proposal also noted that the change would remove flexibility for providers to use a later date, which they may have preferred in order to use more recent volatility data. The same respondent also noted that following the change, there would be cases where members would receive two consecutive annual illustrations based on the same date of fund volatility of 30 September 2025.
FRC response (questions 3 and 4)
15Given broad agreement for this proposal, the FRC has finalised AS TM1 v5.2 with the proposed changes to wording of paragraphs C.2.8 and C.2.12 of AS TM1. We have also updated the associated guidance (now v5.2) to use consistent wording.
16The FRC acknowledges the comments noted in paragraph 14 and considers the wording changes appropriate to achieve consistency following the transition, as supported by the majority of respondents.
17The FRC considers the amended wording sufficiently clear that no further guidance is required on this. We will continue to support the SMPI providers, including discussions as required.
Question 5
Do you agree with our impact assessment? Please give reasons for your response, and estimates of costs where possible.
18Seven respondents answered this question, all of whom agreed with the impact assessment.
19The remaining three respondents did not answer this question but did provide comments on wider aspects of AS TM1.
FRC response
20The written responses indicate stakeholders are in broad agreement of the impact assessment as set out in the consultation paper. As such, the impact assessment performed and communicated as part of the consultation in November 2025 remains valid.
General comments
21In addition to responses to questions asked in the consultation, many respondents also made comments on wider aspects of AS TM1, which are discussed below.
22Several respondents made comments relating to the suitability of using a fund's volatility to assign an accumulation rate assumption (the volatility-based approach), including:
- respondents commenting on known limitations in the use of volatility groups to determine accumulation rates for certain funds, including index linked gilts and illiquid assets;
- one respondent said the current step changes in accumulation rates between volatility groups are significant and suggested the FRC consider a more graduated approach; and
- two respondents recommended that the 0.5% corridor around the boundaries set out in paragraph 2.12 of AS TM1 be increased to 1.0% or 1.5% so that so that fewer funds' accumulation rates would be changed under this review.
23Two respondents noted AS TM1 does not prescribe how benefit underpins and non-standard cases (such as schemes with legal requirements to provide reversionary pensions or increases in retirement) should be allowed for, which could lead to inconsistencies between providers in the projection of members' benefits. One of these respondents requested that the FRC provide guidance in the form of principles and examples for use in these types of cases.
24One respondent noted that the current FRC cycle of consulting during November and issuing the feedback statement by 15 February can make it challenging for providers to implement any significant changes within a short timeframe.
FRC response
25As noted in paragraph 1.6 of the consultation paper, this consultation relates to the annual review which focuses on the appropriateness of accumulation rate assumptions and volatility group boundaries. The FRC is not currently reviewing the general approach of setting accumulation rate assumptions based on an investment's 5-year volatility of monthly returns, and the FRC will consider these comments when conducting the next periodic review of AS TM1 where methodology is in scope.
26With regards to benefit underpins and non-standard cases, the FRC considers this to affect a limited number of illustrations and it is not our intention to issue further guidance at this time.
27With regards to the timing of the consultation cycle, the chosen deadline of 15 February to finalise the revised standard is consistent with the required update to the annuity discount rates based on yields at 15 February each year and this timescale has been in place since it was communicated in October 2022. AS TM1 v5.0 strongly advises providers to take account of the possibility of changes to the assumptions when devising systems for producing SMPIs.
4. Impact Assessment
Benefits
1The change to wording of C.2.8, C.2.12 and the reference in the effective date clarifies the policy intent. The change will provide users of the statutory illustrations with greater consistency of approach between providers in relation to the accumulation rate assumptions. This in turn will provide better consistency of Estimated Retirement Income illustrations on future pensions dashboards.
2The change will reduce some of the burden on providers in cases where multiple parties are involved in the calculations and different interpretations of 'the date the calculation is performed' are currently applied.
Costs
3The FRC understands from stakeholder outreach that a large proportion of providers already interpret the 'date the calculation is performed' to be the same as the 'illustration date' and so will not be impacted by the proposed change.
4For providers that need to make system changes, these will only be to their calculations of fund volatility values. They are not expected to impact any other elements of SMPI calculations or communications to members. The changes would only impact illustrations produced after April 2027, so giving a sufficient period to help providers manage these changes.
5As a result, the FRC anticipates the cost of any system changes to be relatively low and outweighed by the above benefits to users of the statutory illustrations and providers.
Appendix 1 – List of respondents to consultation
The FRC received 10 written responses to the consultation, which are published on the FRC website. The respondents were as follows:
- Aon
- The Association of British Insurers
- The Association of Consulting Actuaries
- Gallagher
- The Investment & Life Assurance Group Limited
- Isio
- Nest Corporation
- Phoenix Group
- Quantum Consulting Accountants Limited
- WTW
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