The FSA is undertaking a fundamental review of projection rates and has published a discussion paper looking for views from the industry.
The paper asks whether it is appropriate for the FSA to withdraw completely from the regulation of future returns or whether the regulator should prohibit companies from providing illustrations of potential returns in any circumstances.
It looks at which products or circumstances it is appropriate to provide information about potential returns and the paper considers excluding products with significant volatility on the grounds that such information cannot realistically be provided.
The FSA suggests that providing layered information to consumers could be a good alternative to individualised or extensive projection information. It asks the industry for views on providing an initial one-page overview of the key elements likely to meet the main information need, to be followed up with detailed and more technical information in a separate document The paper says that any such changes could bring about a shake-up in the mix of products that consumers choose to invest in as well as changes to the sorts of products that providers and advisers want to market and sell.
The FSA underlines the fact that changes will bring significant costs to firms.
Head of retail investments policy David Severn says: “The current one-size fits-all regime is based on a broad-brush approach and does not take sufficient account of different product characteristics or the timeframe for which the consumer wants to invest.
“We are putting forward some ideas for changing the system but we welcome other views on how the system can be improved.”