The Investing and Savings Alliance (Tisa) is calling for greater consistency in pension projection calculations used across different regulatory frameworks.
The call for greater regulatory alignment comes in its response to the Financial Conduct Authority’s (FCA) consultation, looking at how pensions might be adapted for a changing market.
Tisa says standardisation is increasingly important with digital tools and the pensions dashboard set to become a key part of consumer engagement. It says a more standardised approach to projections is needed to ensure consumer confidence and informed decision-making.
Tisa says tools such as pension modellers and scenario-planning applications play an integral role in the decision-making process, particularly for the mass market. The proposed changes in the FCA’s discussion paper (DP24/3) are a step in the right direction toward enhancing these digital solutions, it adds.
Tisa head of retirement, Renny Biggins: “As the pensions industry continues to evolve, it is crucial that we provide a seamless and consistent experience for consumers across different regulatory regimes.
“With over 18m active members in the auto enrolment framework, all individuals should have equal access to clear and reliable pension projections, regardless of whether their schemes are regulated by the FCA or The Pensions Regulator (TPR).”
The introduction of the pensions dashboard is expected to play a pivotal role in increasing engagement and confidence in pension saving. Tisa points out that consumers will soon be able to view their entitlements as projected retirement income using consistent calculations, as required by existing Financial Reporting Council (FRC) Statutory Money Purchase Illustrations (SMPI) rules. However, there remains a critical need to ensure that post-dashboard modellers and tools follow the same core projection methodology to avoid confusion and potential misinformation.
Biggins adds: “To ensure clarity and trust in pension projections, we must align core calculations across all digital tools, including key features illustrations, SMPIs, and modelling services — and this review presents an opportunity to streamline these requirements.
“We also need flexibility to enable firms to innovate and develop engaging propositions that allow consumers to scenario plan, including the ability to change variables such as growth rates and view projected outcomes on a stochastic modelling basis.
“TISA urges policymakers, including the Department for Work and Pensions and TPR, to collaborate with the FCA in driving alignment across pension regulations. Establishing a unified standard for pension projections will help consumers navigate their financial futures with confidence and clarity.”
