The projection rates that pension providers are now using for cash and fixed-interest funds vary by as much as 1.5 per cent, making it a “nightmare” for advisers to compare products, according to O&M Systems.
The firm has hit out at the FSA for failing to produce guidance on acceptable projection rates after clamping down on the area.
Last year, the FSA repeatedly warned pension providers to stop using the standard 5, 7, 9 per cent growth rates to project for cash and fixed-interest funds, demanding that each provider should make and justify their own growth rates.
Most providers have now declared their fund-specific rates but there is a huge variance among them, making it harder to compare funds.
For example, mid-growth projection rates for a pension product investing in the M&G corporate bond fund vary from 6.75 per cent with Prudential to 5.25 per cent with Standard Life.
This means that for a £50,000 investment over 25 years, the fund value would vary by a third, assuming a 1 per cent charge.
Director Graham Miller says: “With no specific guidance on rates being issued by the FSA, there were always going to be differences between rates used in the market. However, a 1.5 per cent difference in the mid-growth rate for the same fund was completely unexpected.
“Almost every provider has a different rate and there is no consistency across the market. This will be a nightmare for IFAs to understand. If they get a quote from two providers, they are going to get massively different projections. Guidance from the FSA would not have gone amiss.”
An FSA spokeswoman says: “We have provided firms with a strong base for determining appropriate projection rates for their products.”