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DWP benefit statements will show pension shock

Pension experts are predicting a shock for money-purchase

policyholders who will discover from the Government&#39s planned

combined benefit statements that their retirement benefits are up to

60 per cent lower than originally projected.

The Department for Work and Pensions&#39 statements are designed to

provide individuals with an annual all-in-one projection of the

benefits they will receive on retirement.

But the DWP actuarial working party, currently deciding how the

illustrations will be calculated, is warning policyholders to brace

themselves to find benefits are only 40 per cent of the point-of-sale

projections produced in line with FSA guidelines.

The FSA is set to publish a consultation paper on changing these

point-of-sale projections to bring them in line with the DWP once the

DWP actuarial working party has set out its proposals in March.

The DWP illustrations are to become compulsory from April 2003 and

will apply to all money-purchase plans.

The industry says these projections will become a major issue and are

calling on the DWP and the FSA to speed up the process.

DWP actuarial working party chairman Stewart Ritchie says: “This 40

per cent figure is roughly indicative of the size of change from

point-of-sale projections. The key message is that when people see

these statements the figures will be an awful lot lower than at point

of sale and people may not be on target for the retirement they want.”

Friends Provident pensions technical manager Chris Bellers says: “We

are concerned that we may not have enough lead time to prepare for

this. Everything is based on the FSA guidelines, including Raising

Standards. The sooner that we get the new basis the better.”

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