The FSA is considering cutting the projection rates firms are required to use when marketing retail investment products which do not fall within the scope of the Markets in Financial Instruments Directive.
Under current FSA rules, the intermediate rate of return projection which providers are required to publish in product marketing material is 7 per cent.
However, an independent review carried out by PricewaterhouseCoopers suggests this figure should be reduced to between 5.25 per cent and 6.5 per cent.
The report says: “Following our review of academic research, updated market information and broader economic developments, our best estimate for the single intermediate rate of return is 6 per cent, in nominal terms, with a range around this figure of 5.25 per cent to 6.5 per cent.
“We therefore consider the current 7 per cent intermediate figure to be too high and suggest the FSA brings this figure down to within the range of 5.25 per cent and 6.5 per cent.”
FSA head of investments policy Peter Smith says: “It is crucial that projection rates are set at a realistic level so that investors are not misled. Today’s independent research indicates that our maximum projection rates should be reduced.
“We are seeking views on the range of rates so investors receive a reasonable indication of what they can expect from their investment.”