It is a key requirement of the FCA for pension switching cases that you conduct a comparison of the costs and charges of the ceding and new plan on a like-for-like basis (taking account of all costs & charges). This can be achieved by including a projection of benefits OR reduction in yield comparison within your suitability report. We believe a reduction in yield comparison is the best solution for the reasons set out in this blog, hence why a reduction in yield comparison is included as a standard step within Genovo.
However, we do appreciate that not everyone wants to adopt this approach (and why should they!), so we've created a solution that will enable our users to customise their account so a projected fund comparison is included instead of, or as well as, a reduction in yield comparison in their reports.
So here are some easy-to-follow instructions that walk you through how you can customise your report template to reflect the output of two of the most popular providers of pension analysis software - O&M Systems and SelectaPension.
1. Go to Customisation > Report Content Manager.
2. Select Suitability Report from the Report Type drop down, and Appendix - Plan Comparison from the Section drop down menu. The page will refresh and the snippets of this section will be displayed beneath the drop down menu.
4. Click the pencil (edit) icon for the Projected Pension Fund Comparison snippet (this is a blank snippet which is automatically triggered whenever replacement business is recommended in the Review of Existing Pension Plans and Review of Retirement Income Plans sections). You'll be taken to a new page "Snippet Detail - Projected Pension Fund Comparison".
5. Click the create custom snippet button above the table and you'll be taken to the Snippet Editor where you'll be able to add wording and a table to this snippet to reflect your preferred content.
The next steps walk you through how to add a projection of benefits template table (and the surrounding wording) to this snippet in line with the standard output provided by O&M and SelectaPension. However, you may wish to adapt the wording and / or table to reflect your own requirements. This is easily achieved and for further information on how to create your own table in a snippet using the Genovo HTML editor click here.
6. Next, within the Snippet Editor click the source button (highlighted in red below) and you'll be presented with a view much like the below (although there wont be any text in the text box.)
7. Select and copy the html code (coloured blue) below relating to O&M or SelectaPension as per your preference, and paste it into the empty text box of the Snippet Editor.
O&M Systems
<h2>Projected Fund Comparison and Critical Yield</h2>
<p>It is not always easy to compare charges on a like-for-like basis. The table below compares the projected fund you could receive from your existing and the recommended alternative plans at age *INSERT AGE* assuming the highlighted growth rates. Although the comparison takes account of any penalties and charges applied as a result of the switch, it does not take account of the relative investment performance of the existing and proposed alternative plans.</p>
<table border="1" cellpadding="1" cellspacing="1" style="width:100%;">
<tbody>
<tr>
<th style="width:55%">Assumed Growth Rates</th>
<th style="width:15%">*INSERT*%</th>
<th style="width:15%">*INSERT*%</th>
<th style="width:15%">*INSERT*%</th>
</tr>
<tr>
<td><strong>Existing Plans Consolidated - Projected Fund</strong></td>
<td><strong>£</strong></td>
<td><strong>£</strong></td>
<td><strong>£</strong></td>
</tr>
<tr>
<td>Equates to an ongoing annual charge of:</td>
<td>%</td>
<td>%</td>
<td>%</td>
</tr>
<tr>
<th> </th>
<th> </th>
<th> </th>
<th> </th>
</tr>
<tr>
<td><strong>Recommended Alternative Plan - Projected Fund</strong></td>
<td><strong>£</strong></td>
<td><strong>£</strong></td>
<td><strong>£</strong></td>
</tr>
<tr>
<td>Compared with your existing plans, the recommended alternative would change your fund by:</td>
<td>%</td>
<td>%</td>
<td>%</td>
</tr>
<tr>
<th> </th>
<th> </th>
<th> </th>
<th> </th>
</tr>
<tr>
<td>Critical Yield</td>
<td>%</td>
<td>%</td>
<td>%</td>
</tr>
<tr>
<td>Additional Annual Growth Required</td>
<td>%</td>
<td>%</td>
<td>%</td>
</tr>
</tbody>
</table>
<p>The table also shows the annual rate of growth <i>(critical yield)</i> that the recommended alternative plan must achieve in order to provide a fund at least as good as that offered by your existing plans at the end of the assumed investment term. If the critical yield is lower than its corresponding <i>assumed growth rate</i> this indicates that an equal fund could still be produced even if the actual annual growth rate achieved by the alternative plan is lower than your existing plans, and vice versa. The <i>additional annual growth rate</i> indicates the annual investment growth that is required, in addition to the <i>assumed growth rate</i>, to match the projected fund value of the existing plans.</p>
SelectaPension
<h2>Projected Fund Comparison</h2>
<p>It is not always easy to compare charges on a like-for-like basis. The table below compares the projected fund you could receive from your existing plan and the recommended alternative at age *INSERT AGE* assuming the highlighted growth rates. Although the comparison takes account of any penalties and charges applied as a result of the switch, it does not take account of the relative investment performance of the existing and proposed alternative plans.</p>
<table border="1" cellpadding="1" cellspacing="1" style="width:100%;">
<tbody>
<tr>
<th style="width:55%">Assumed Growth Rate</th>
<th style="width:15%">*INSERT*%</th>
<th style="width:15%">*INSERT*%</th>
<th style="width:15%">*INSERT*%</th>
</tr>
<tr>
<th>Existing Plans - Projected Fund</th>
<td><strong>£</strong></td>
<td><strong>£</strong></td>
<td><strong>£</strong></td>
</tr>
<tr>
<th> </th>
<th> </th>
<th> </th>
<th> </th>
</tr>
<tr>
<th><strong>Recommended Alternative Plan - Projected Fund</strong></th>
<td><strong>£</strong></td>
<td><strong>£</strong></td>
<td><strong>£</strong></td>
</tr>
<tr>
<th>Rate of Return Required From Recommended Alternative to Match Existing</th>
<td>%</td>
<td>%</td>
<td>%</td>
</tr>
<tr>
<th>Effect this will have on fund if moved to Recommend Alternative</th>
<td>%</td>
<td>%</td>
<td>%</td>
</tr>
<tr>
<th>Reduction in Yield if moved to Recommended Alternative</th>
<td>%</td>
<td>%</td>
<td>%</td>
</tr>
</tbody>
</table>
8. Click save. That's it you're done!
In terms of the report output, the content of this snippet will now be automatically inserted within the Appendix - Plan Comparison section of your reports whenever any one of the following recommended actions are selected in the Recommended Action step of the following review sections:
| Section | Recommended Action |
|---|---|
| Review of Existing Pensions | Switch Partially switch Take benefits having switched Take a lump sum, then take benefits having switched Take a lump sum and then switch |
Review of Existing Retirement Income Plans | Switch |
If you do not want to include a reduction in yield comparison in your reports simply ignore / skip the Plan Comparison - Reduction In Yield step in the review section and no mention of reduction in yield will be included in your report when it downloads to Word.
In terms of the Projected Fund Comparison table you will need to manually insert the assumed growth rates, projected fund values etc for the existing and recommended alternative plans once you've downloaded the report to Word.