The troubled state of projection rates

Further to recent research by PwC, the FSA proposes in CP12/10 to revise down the return assumptions used to inform customers of investments’ likely performance and also to increase the span of flanking rates either side of the intermediate figure. Adam Samuel scours through past and present quagmires in a “tawdry story”.

Adam Samuel BA LLM DipPFS MCISI FCIArb Certs CII (MP&ER) Barrister and Attorney may be contacted at AdamSamuel@aol.com. His book, ‘Complaints and Compensation: a Guide to the Financial Services Market’, is available from his website, www.adamsamuel.com.

The recent publication by the FSA of proposed changes to the projection rates for packaged investment products heralded a new phase in an already tawdry story. Customers, when they take out a pension, start paying into a regular premium plan or invest in a bond, receive a projection as some indication of how their investment will perform. Yet, what evidence exists about the accuracy of projections suggests that these types of ‘illustration’ rarely meet the customer’s expectations in this area.