No changes to AS TM1 amid 'considerable uncertainty', FRC confirms

The Financial Reporting Council (FRC) has concluded that no changes are currently needed to the assumptions under Actuarial Standard Technical Memorandum 1 (AS TM1), which is set to remain in force from 1 October 2023 to 5 April 2024.

AS TM1 sets out the required approach for producing the annual statutory money purchase illustrations (SMPIs) received by those in DC pension schemes, with the FRC recently confirming the changes made in AS TM1 v5.0 following an "extensive consultation".

The FRC has since undertaken a further review of these assumptions based on more recent market conditions, to ensure that the accumulation rates and volatility group boundaries remain appropriate for application from October 2023.

Following its review, the FRC emphasised that while market conditions and outlook have changed since the previous review was conducted, "considerable uncertainty remains".

In light of this, the FRC has opted to retain the assumptions specified in AS TM1 v5.0 "in the interest of maintaining stability of these assumptions over time".

It stated: "The FRC conducts an annual review of the appropriateness of assumptions used in AS TM1 and has concluded that the assumptions set out in AS TM1 v5.0 are still appropriate and will remain in force for SMPIs issued between 1 October 2023 and 5 April 2024."

Industry experts previously raised concerns around the updated AS TM1, which will mean that accumulation rate assumptions are based on investment, volatility, from October 2023, rather than the current expectations of future fund performance.

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