The FSA must wake up to the fact that current industry reporting requirements are not based in reality, according to independent consultant Ned Cazalet.Cazalet warned the IEA annual conference last week that product providers are not disclosing real profits as their new business numbers in life and pensions are based on money being recycled around the industry. Data collated by Cazalet Consulting shows that life offices spent 21bn on commission in the last three years, excluding mortgages and general insurance, but the amount of net new pension business attracted stands at -12bn. Cazalet said: “How on earth are providers saying that they are profitable? What is the FSA doing? This suggests that the regulator needs to wake up on Icas. The FSA must ensure that Icas statements and individual capital guidance is founded in reality.” He also said that the closed life fund sector, which currently stands at a total of around 80bn, will double by 2010 because of further with-profits fund closures and the growth of open architecture. He said: “Half of life offices’ business is dead – it looks open but is actually dead. The closed fund sector is going to get an awful lot bigger and legacy activity will also increase. It will all be surpassed by open architecture. This is starting to happen right now.” Cazalet predicts that platforms will help to stem the recycling of pension money around the industry. But he said there will only be three or four big open architecture players by 2010.