Statutory money purchase illustrations (SMPIs)
All schemes apart from RACs and SSASs must send an annual illustration to members to show in real terms what the value of the retirement benefits could be worth, known as an SMPI
SMPI show projected values taking into account inflation.
It is worked out by:
The main assumptions:
- Projections are done using a growth rate by the provider
- Inflation is at 2.5%
- Future contributions are taken into account, and if earnings related they are increased in line with inflation at 2.5%
- Future charges taken into account
- Annuity rates are determined on 15th Feb each year, it may assume the annuity is or isn’t indexed and if there is any guaranteed period.
- It may assume a PCLS is taken.
- Expenses in retirement are 4% of the annuity value
- Provider discretion if the illustration shows a spouse’s pension
- Mortality is on unisex rates and there is no allowance for mortality before retirement