The Society of Pension Professionals has warned pension dashboards will have to provide illustrative figures to defined benefit members, as it will not be possible to have accurate quotations due to the complexity of current benefit structures.

In a report published today (September 13), the industry body made a series of recommendations to the Department of Work and Pensions and the Pensions Dashboard Programme on how estimated retirement income calculations should be approached from the beginning of the project’s rollout.

Since one of the design principles set out by the DWP was that they will initially be used only for presentation not calculation purposes, the dashboards will not be able to calculate projected pensions.

The responsibility is therefore placed on providers and schemes to supply an estimated retirement income for each member.

These calculations will be especially difficult in DB schemes, where annual retirement income will be calculated based on current earnings.

Deferred individuals, on the other hand, could see their annual pension uplifted to include any inflation-proofing that has already been amassed.

Four types of income

The SPP report identified four types of estimated retirement income: at leaving, at current date, projected and adjusted, and projected to retirement.

While admitting none of the calculations were perfect, the SPP dismissed the first and third option, since they are “figures as a date either in the past or in the future”.

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