At last weeks AMPS open meeting at the IOD, we were treated to a number of excellent sessions on AMPS activities, from lobbying the government on tax relief to clarifying the regulators position on disclosure.
There was some discussion on variable or asset based projections for illustrations purposes rather than the use of the product wrapper 5, 7 and 9 basis. The need for variable projection capabilities has been driven out of two key reasons.
1. Firstly the financial downturn of the past two or so years has illustrated the inaccuracies of using inappropriate projection rates for asset classes that don’t perform at the same rate.
2. The FSA declared on the need for more granular, asset-level projections in its ‘SIPP Operators – Report on the findings of a Thematic Review’ dated September 2009 and its associated fact sheet ‘SIPP Operators Thematic Review – Regulatory Responsibilities’ which summarised as follows: “It is important that firms consider the nature of underlying assets and use projections that use realistic growth rates.”
In a further quote from the Pensions Thematic Review, the FSA go on to state, “For example, money held in a cash account will be expected to generate lower growth rates. Firms are not bound by the FSA standardised maximum deterministic projection rates, currently 5%, 7% and 9% for pensions. COBS 13 Annex 2 2.4R(1) confirms that projections must be calculated using lower rates of return, if the standardised rates overstate the investment potential of the product.”
In response to the Pensions Thematic Review and the intentions outlined in COBS 13 Annex 2, we have launched a new version of Imago, Imago Front Office Version 4. Version 4 supports variable asset projection rates, whilst additionally maintaining product rates. Reduction In Yields can be set at both the product and asset level so as to continue to provide a basis for product comparison and asset transfer justifications.
