Current pensions law prevents protected rights funds being held in a SIPP. By common consent, this is a major frustration for the industry. The law is set to change, however. In August 2007 the DWP announced it would be consulting in September on legislative provisions to remove the barrier, but the condoc has not yet appeared.

On enquiry, the DWP has recently confirmed to Aries that they are currently "putting the finishing touches" to a set of draft regulations that will amend the Personal Pension Schemes (Appropriate Schemes) Regulations 1997 (SI 1997/470 - as amended, notably by SI 2006/147) to permit protected rights to be held in a SIPP. These are expected to be put out to consultation before the end of this month. The regulations together with the accompanying consultation document will be posted on the Department's website and of course reported here.

Meanwhile, today the Markets in Financial Instruments Directive (MiFID) came into effect, replacing the Investment Services Directive (ISD). As part of the process, earlier this year the FSA took the opportunity to consult on a review of elements of the Conduct of Business regime that are outside the scope of MiFID, which include personal pension illustrations and projections.

The resulting Policy Statement 07/18 Conduct of Business Regime has been published this week. The consequential changes to the FSA Handbook come into effect today, but with transitional arrangements for certain requirements.

The FSA's main proposal is to retain the current illustration requirements for non-MiFID business, but to:

• simplify the rules;
• allow greater use of generic projections, but only where the circumstances of the individual do not affect the premium or potential return;
• make the use of projections voluntary where they do not add value or context to the overall disclosure material; and
• require real (inflation adjusted) projections to be provided at the point of sale for pensions.

The FSA's response to some objections to this last requirement emphasises the desirability of increased consistency with Statutory Money Purchase Illustrations (SMPI), which show real figures:

"We continue to believe that the consumer benefits of requiring projections for pensions in real terms outweigh the costs. Having a projection in real terms would make projections at the point of sale more consistent with existing SMPI requirements and so mitigate potential misunderstandings about the difference between the two. It should also result in consumers having a more realistic sense of the likely value of their pension."

"We fully appreciate the need for real projections to be calculated in a manner which is consistent with SMPIs. However, the DWP is currently considering replacing their detailed disclosure requirements, including prescription relating to the post sale regime for statements or SMPIs, with a more principles-based approach."

"For this reason we have decided to offer firms, as an interim position whilst the post-sale regime remains under consideration, the ability to explain clearly the impact of inflation through means other than the provision of real figures."

"Firms may of course provide such information through real figures, as now. We have made minor changes so that firms may, with an appropriate explanation, follow SMPI assumptions rather than our basis for these figures."

"Once the direction of the DWP's work on a principles-based approach and the post-sale regime is clear, or, at the latest, by the end of 2010, we will consult on bringing into effect mandatory requirements consistent with that regime for including real figures within pension projections."

[PS 07/18 para 16.12]