The FSA has confirmed plans to cut the projection rates providers and advisers are required to use to illustrate potential future investment returns.
Currently, firms must project three different possible rates of return – 5 per cent, 7 per cent and 9 per cent – for tax advantaged products such as personal pensions. The regulator proposes reducing these rates to 2 per cent, 5 per cent and 8 per cent.
The FSA also plans to reduce the projection rates on tax disadvantaged products, such as investment bonds and endowment policies.
These are currently set at 4 per cent, 6 per cent and 8 per cent but the regulator wants to reduce these to 1.5 per cent, 4.5 per cent and 7.5 per cent.
FSA director of conduct policy Sheila Nicoll (pictured) says: “Investors need to be able to trust information they receive and any suggestion as to how their investment might grow in future must not be misleading.
“We are proposing lower growth rates which firms may use but we are reinforcing the fact that these are maximum levels. Providers and advisers need to take a long, hard look at the rates they use, taking account of the underlying assets they are dealing with.”