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PwC survey backs cut in regulator’s projection rates

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 Mifid.

Under current FSA rules, the intermediate rate of return projection which pension and life product providers are required to publish in their marketing material is 7 per cent. Firms are also required to publish growth rates 2 per cent either side of the central estimate.

An independent review of the projection rates, carried out by PricewaterhouseCoopers and published this week, suggests the intermediate figure should be cut to between 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. The 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.”
AJ Bell marketing director Billy Mackay says: “Illustrations are fine when you are comparing charges but they are not useful as an indication of what an investor is going to get when they retire.

“At the moment we provide investors pages and pages of numbers which are meaningless and confusing to your average retail investor. The industry and the FSA have to come up with a more simple way of providing people with an estimate of what they will get when they retire.”

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