Find out more about modification of consent COBS 13.
During 2018, an industry working group has undertaken work to formulate a simpler annual statement. The simpler annual statement is intended to enable defined contribution schemes to meet their requirements to provide annual Statutory Money Purchase Illustrations (SMPIs) but in a way which is simpler and more comprehensible to consumers. The provision and content of SMPIs is set out in legislation. The projection of future income within the SMPI is based on assumptions set out by the Financial Reporting Council.
We support the objective of providing information to consumers in a way which is simpler so that they are more likely to understand it and engage with it.
Our COBS rules require projections within a Key Features Illustration or prepared at other times to be presented and calculated in a certain way. COBS 13 Annex 2R sets out these requirements, but COBS 13 Annex 2R 1.9 provides an exemption these requirements (to provide quotations illustrating lower, intermediate and higher rates of return using FCA assumptions) where the projection is consistent with the statutory money purchase illustration requirements.
It has been proposed that the simpler annual statement form of the SMPI should include an additional projection which is not required by the legislation. This additional projection would illustrate the potential effect on benefits of increasing contributions to the pension scheme.
This modification is intended to enable the provision of this additional projection within an SMPI without it being subject to our projection rules.
This modification by consent will be of interest to providers of annual SMPIs, as it broadens the existing exemption (in COBS 13 Annex 2 R 1.9) from the FCA’s projection rules which currently only applies ‘for a projection for an in-force product which is consistent with the statutory money purchase illustration requirements’ as set out by the Department for Work and Pensions (which only require one illustration of possible benefit).
Purpose of the modification
This modification by consent extends the exemption to projections which are based on an individual saver increasing the level of contributions they make as long as the projection is consistent with the underlying SMPI requirements and included within the SMPI.
What this means for firms
The modification offered allows providers to include information on how projected benefits might be improved if individual savers were to increase their regular contributions without requiring them to provide projections of benefits using FCA assumptions and, for example, illustrating three different rates of return.
We have set out the changes in detail in the modification direction.
This modification is valid until 30 September 2022.
How to use the modification
If you want to take advantage of this modification by consent describe here, you should email us at [email protected].
We will then write to you to confirm that the modification has been granted, and we will publish each modification direction we grant on our website.