Technical Memorandum 1 (TM1), the guidance from the Actuarial Profession* on which pension providers base Statutory Money Purchase Illustrations (SMPIs), has been updated to take account of civil partnership legislation and changes to contracting-out rebates and HMRC Limits. The ages used for SMPIs for protected rights have also been brought into line with those used in FSA point of sale projections. TM1 Version 1.2 applies to all illustrations with dates on or after 1 November 2006, up to and including 5 April 2007.

*from April 2007 the Board for Actuarial Standards will take over responsibility for TM1

TM1 specifies a single set of assumptions to be used to illustrate the amount of pension that might be payable when a member retires, in terms of today's prices. The illustrations apply to a wide range of individual and occupational money purchase pension arrangements (including personal pensions, money purchase occupational pension schemes and stakeholder pensions) and must be provided annually to members.

SMPIs were introduced in April 2003 and the basis was last revised in February 2005. A 'tracked changes' version is available as a pdf download.

Aries SMPI clients will receive an update CD shortly.

Update 24 November

Please note that work on the new release of Aries SMPI has been temporarily suspended, as a result of concerns raised by a number of providers about the change to ages for protected rights annuities as specified in para 11.2.2. not being consistent with FSA rules on point-of-sale forecasts. The Actuarial Profession is redrafting this paragraph and has advised providers not to revise systems at this time to comply with the provisions of 11.2.2 as specified in version 1.2. TM1.2 gave providers the freedom to implement this paragraph between 1 November 2006 and 6 April 2007.

The actuaries are promising a revision to this section will be released soon as possible and well in advance of para 11.2.2 of version 1.2 becoming mandatory on 6 April 2007. When available, details of the planned revision will be posted to the Actuarial Profession's SMPI homepage.

Further Update 22 December

The Actuarial Profession yesterday (21 December) issued a Press Release stating how the Oct/Nov 2006 update to TM1 should be amended.

The essential point is this: the note to paragraph 11.2.2 of the revised TM1, issued in October 2006, should read:

"Note: The member’s spouse or civil partner shall be assumed to be three years older than the member whether the member is male or female (except as provided in 12.2.2). Paragraph 12.2.1 should be ignored for unisex annuities."