The Board for Actuarial Standards (BAS) - responsible for setting technical actuarial standards in the UK - has released a new version of Technical Memorandum TM1 (version 2.0, December 2011). TM1 represents the key guidance which governs statutory money purchase illustrations* (SMPI), which must** be provided annually to all members with money purchase benefits under occupational, personal and stakeholder pension schemes.

* SMPIs show the amount of pension that might be payable when a member retires in terms of today's prices, assuming regular contributions continue to retirement and that the pension at retirement will subsequently increase in line with inflation.

** under amendments to the Disclosure Regs (SI 2002/1383). Notwithstanding, TPR discovered from a recent independent survey of 150 hybrid schemes that almost a third were not fulfilling their obligation to produce SMPIs (see Aries article).

This version, effective from 6 April 2012, contains technical amendments to the existing version 1.4 (February 2011). Following extensive consultation, the document has been restructured and successfully shortened from 52 pages to 14. The BAS has published an accompanying document ('Supplementary Information') which contains some of the material that was in v1.4.

As expected, v2.0 requires the use of mortality tables PCMA00 (males) and PCFA00 (females) for illustrations after 5 April 2012. It also emphasises that providers of SMPIs must take proper account of potential investment returns when setting the long-term investment assumption used in their projections. In all other respects the key assumptions (RPI and earnings inflation rates; maximum accumulation rate; annuity rate; expenses at retirement) are unchanged from v1.4. Providers may comply instead with TM1 version 1.4 for statutory illustrations issued on or after 6 April but before 21 December 2012.