The Irish Pensions Authority (IPA) has published guidance for trustees in relation to determining the assumptions used in pension benefit statements.

Under EU law, trustees of schemes or trust RACs in Ireland are required to provide certain key information to members in their pension benefit statements, including information on pension benefit projections.

The IPA is responsible for setting out the rules to determine the assumptions of the projections.

Pension trustees must then apply these rules to determine the annual rate of nominal investment returns, the annual rate of inflation and the trend of future wages.

In its guidance document, the IPA sets out the principles in accordance with which the parameters used for the calculation of the projections must be determined.

The guidance aims to help trustees provide illustrations of retirement benefits that are fair, clear, and not misleading to scheme members.

The IPA set out how trustees must calculate members’ projected retirement funds, as well as assumed investment returns in a ‘best estimate’ scenario and an ‘unfavourable’ scenario.

It also outlined the assumptions for how retirement benefits and contribution increases are calculated for the pension benefit statement.

Furthermore, the guidance instructs trustees how they should be calculating annuity rates for pension benefit statements, as well as projected deductions for the cost of protection benefits, and projected deductions to cover expenses and charges.

Finally, the IPA noted that if additional information is required to ensure that a pension benefit statement is fair, clear and not misleading, this information must also be included.

Examples of this included in the guidance were situations where a scheme is invested in an asset structure under which relatively large bonuses may be added to fund at the member’s retirement date, or certain derivative-based products where the benefit profile is not a smooth function of underlying investment returns.

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