The Financial Reporting Council has launched a review into how pension illustrations are calculated to reflect new legislation, including guided retirement.
The watchdog, which oversees auditors and actuaries, is seeking feedback on actuarial standards for illustrations should evolve as retirement options change.
The review comes as the government has launched its consultations on guided retirement – which will introduce default options for traditional defined contribution (DC) schemes – and retirement-only CDC arrangements.
The FRC has published a formal call for feedback as well as a discussion paper to gather views on “how future standards could support pension illustrations both before and throughout retirement”.
In particular, the regulator said it wanted input on the accumulation rates used for pre-retirement projections and calculations, and the assumptions used when converting DC pots into an income.
The deadline for feedback is 26 January 2027.
Adam Bexson, senior consultant at Broadstone, said: “As defined contribution pensions become the primary source of retirement income for millions of workers, it is increasingly important that savers understand not just how much they might accumulate, but how that translates into a sustainable income throughout retirement.
“Clear, consistent and accessible projections will be essential to help people make informed decisions… and ultimately achieve better retirement outcomes.”
Adam Bexson, Broadstone
“Illustrations showing how different withdrawal rates could affect the longevity of their savings will be particularly valuable, helping people understand the trade-offs between taking more income today and maintaining financial security later in retirement.”
Bexson said it was important that illustration rules evolved alongside changes to retirement options. He also argued that any updates to standards should reflect how income needs can change through retirement.
“We need to see more focus on how savers can make effective use of the pension freedoms that have been available for the past decade,” he added.
“Clear, consistent and accessible projections will be essential to help people make informed decisions, manage the risk of either running out of savings or being unnecessarily cautious with their spending and ultimately achieve better retirement outcomes.”
