This modification allows schemes to provide an additional projection within Statutory Money Purchase Illustrations (SMPIs), without it being subject to our projection rules.
In 2018, an industry working group worked to create a simpler annual statement. This statement was designed to help defined contribution schemes meet their requirements to provide annual Statutory Money Purchase Illustrations (SMPIs) in a way that was easier to understand for consumers. We support this objective.
Statutory Money Purchase Illustrations (SMPIs)
The provision and content of SMPIs is set out in legislation. The projection of future income within the SMPI is based on assumptions set out by the Financial Reporting Council.
Our COBS rules require projections within a Key Features Illustration or prepared at other times to be presented and calculated in a certain way. COBS 13 Annex 2R sets out these requirements, but COBS 13 Annex 2R 1.9 provides an exemption to these requirements (to provide quotations illustrating lower, intermediate and higher rates of return using FCA assumptions) where the projection is consistent with the SMPI requirements.
It’s been proposed that the simpler annual statement form of the SMPI should include an additional projection that is not required by the legislation. This additional projection would illustrate the potential effect on benefits of increasing contributions to the pension scheme.
This modification is intended to enable the provision of this additional projection within an SMPI, without it being subject to our projection rules.
This modification by consent will be of interest to providers of annual SMPIs, as it broadens the existing exemption (in COBS 13 Annex 2 R 1.9) from the FCA’s projection rules. This currently only applies ‘for a projection for an in-force product which is consistent with the SMPI requirements’ as set out by the Department for Work and Pensions (which only requires one illustration of possible benefit).
Purpose of the modification
This modification by consent extends the exemption to projections which are based on an individual saver increasing the level of contributions they make. The projection must be consistent with the underlying SMPI requirements and be included within the SMPI.
What this means for firms
The modification offered allows providers to include information on how projected benefits might be improved if individual savers were to increase their regular contributions without requiring them to provide projections of benefits using FCA assumptions and, for example, illustrating 3 different rates of return.
We have set out the changes in detail in the modification direction.
View the modification direction (PDF)[1]
This modification is valid until 30 September 2026.
How to use the modification
If you want to take advantage of this modification by consent, you should email us at [email protected].
We’ll then write to you to confirm that the modification has been granted, and we’ll publish each modification direction we grant on our website.