FRC undertakes annual survey of pension assumptions
04 November 2019
The Financial Reporting Council (FRC) has published the results of its annual survey of the accumulation rates used by providers to make the projections of funds to retirement.
Since 2013 the FRC has undertaken an annual survey of the accumulation rates used by providers. This is done to check market consistency with the underlying principles of the actuarial standard that sets the framework (AS TM1).
In 2019, the FRC received responses from 22 providers who collectively issue over 33 million SMPIs. Approximately 59% of these statements were issued to individuals with contract-based arrangements.
Legislation requires providers to issue a Statutory Money Purchase Illustration (SMPI) in respect of each defined contribution pension policy or arrangement to each policy holder or scheme member. The FRC has responsibility for setting the assumptions and maintaining the framework within which these illustrations of projected retirement income are made.
The survey results show that accumulation rates used for 2019 illustrations were broadly similar overall to those used in 2018.
Additionally, in 2019 the FRC investigated how many projections assume contributions increasing in line with wage inflation. The FRC did this as the difference between price inflation and wage inflation is the primary difference in assumptions between the SMPI projections and those produced under FCA rules at point of sale or on an ad hoc timing.
From the responses, the FRC estimates that up to 16 million projections are issued on this basis.
More details can be found in the survey report at the following link