Research Services for Pensions illustrations: presenting uncertainty and variability

What the buyer says

BACKGROUND The FRC is the UK's independent regulator responsible for issuing and maintaining technical actuarial standards. It is responsible for Actuarial Standard Technical Memorandum 1 (AS TM1), which specifies the assumptions and methods used to calculate statutory illustrations of money purchase, or defined contribution, pensions. Pension illustrations are based on assumptions about future investment returns, inflation and retirement choices. The uncertainty and variability inherent in future retirement outcomes can be challenging for defined contribution (DC) savers to understand. The FRC is interested in how this uncertainty and variability can be communicated clearly and effectively to support savers in understanding and assessing the adequacy of their pension arrangements. PURPOSE This research will gather evidence on how information can be presented to help DC savers understand the uncertainty and variability of their estimated pension income. It will inform the development of pension illustrations and related communications and support savers in understanding and assessing the adequacy of their pension arrangements. The FRC is considering the information provided in the following contexts: • For pensions illustrations given to DC savers in early- and mid-career, there are uncertainties in the estimates of projected pension income; the further away from retirement, the greater the uncertainty. • For pensions illustrations given to DC savers approaching retirement, there is uncertainty and variability in both the amount and pattern of income beyond the first point of accessing DC savings. The primary focus of the research will be on the presentation of pensions illustrations information. The successful contractor(s) will therefore need strong knowledge and ex…