18 December 2007

Independent research commissioned by the Financial Services Authority (FSA) supports retention of the existing rates firms are required to use when issuing projections of prospective future investment returns.

PricewaterhouseCoopers' (PwC) research, published today, is available on the FSA website.

These rates apply to investment products that do not fall within the scope of the Markets in Financial Instruments Directive (MiFID).

The FSA will continue to require firms to project on three different rates of return for such products - 5%, 7% and 9%. Firms are required to revise these rates downwards where the asset-mix of a product makes it unlikely to achieve returns in line with these rates. The rates to be used for products with a heavier tax liability - such as investment life policies - will remain 1% lower at 4%, 6% and 8%.

For non-MiFID investment products, FSA rules require firms to present projections in a standard format and to use prescribed rates of return. These rules are designed to ensure that projections illustrate the effect of changes in the rate of return and to prevent consumers being misled by inappropriately high rates of return.

The FSA is committed to periodically reviewing the appropriateness of these rates - its last review was conducted by PwC in 2003.

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