FRC has reviewed the assumptions underlying AS TM1 and will make no changes
News types: Generic Announcement
Published: 25 June 2018
The Financial Reporting Council (FRC) has responsibility to set and maintain the assumptions used to produce the Statutory Money Purchase Illustrations (SMPIs) sent annually to individuals who have Defined Contribution (DC) pension plans.
To meet this responsibility, the FRC reviews the assumptions in AS TM1 which governs these illustrations against the background of current and anticipated economic and demographic experience. In addition, it monitors those assumptions in which providers have a degree of flexibility (for example the choice of accumulation rates to be used in the projection).
The FRC's primary objective is to arrive at assumptions:
- Which reflect its best estimate of long-term future experience
- Which are consistent from year-to-year so that those who receive the SMPIs can plan against a background of stability to the extent possible.
The FRC also aims to ensure consistency between the assumptions set in AS TM1 and those set by the Financial Conduct Authority in their Conduct of Business Handbook for the projection of pension policies as far as the different purposes of the SMPI and the FCA CoBS projections permit.
The FRC has recently conducted a review of AS TM1 assumptions and in line with the above objectives it has concluded that no change is required at present and that version 4.2 of AS TM1 (the current version) will continue to remain in force and applicable.
The FRC will revisit the assumptions next year with a view to assessing whether it should specify any changes as from 6 April 2020.