The FSA has signalled it will not cave in to pressure from the Association of British Insurers to allow companies to continue using standard projection rates for cash.
The ABI held an emergency meeting to discuss lobbying the FSA to change its stance on projection rates after a strongly worded letter from FSA director of conduct risk Dan Waters to compliance officers, insisting caveats would not be tolerated.
ABI members have argued the benefits to consumers of changing projection rates will be trivial while the cost may run to tens of millions of pounds. The ABI asked members for evidence the FSA has changed its policy.
But FSA spokesman Adam Richards-Gray says: “This is not a U-turn. We have always stipulated that standard rates need to be revised down for products where the return is likely to be lower. Otherwise, we would be saying it is legitimate to apply misleading rates of return. That would be unclear and misleading for consumers.
“Caveats are inappropriate. Dan’s letter made our position explicitly clear. Firms need to be acting on this now and if we come back and they are not, then we will need to take appropriate action.”