Advisers have warned that cutting projection rates will force providers and advisers to illustrate negative returns to clients, which could deter them from investing in financial products.
Last week, the regulator confirmed plans to reduce the projected future investment returns providers and advisers must use to illustrate financial products.
AWD Chase de Vere head of communications Patrick Connolly says: “Statutory money-purchase illustration rules require that you adjust projections to take account of expected future inflation at 2.5 per cent, which means we will be forced to send negative figures to clients. I strongly believe the recommended 1.5 per cent projection rate is too low and will act as a deterrent for people to take out new policies or continue with existing ones.”
Evolve Financial Planning director Jason Witcombe says: “There is a risk people will end up running even more scared from financial products than they are at the moment.”