Pension projections cut by FSA

Projected investment returns on pension plans must be reduced from 2014, says the Financial Services Authority (FSA).

It wants investment firms to show more realistic, and also less optimistic, potential returns than those currently used.

Firms will have a year to implement the new rates, which begin in April 2014.

Pension firms currently give three different rates of return - 5%, 7% and 9% - and should revise them down if a product appears unlikely to achieve this.  The FSA has found that some firms had failed to downgrade the investment projections in their brochures, even when it had become clear that they were unlikely to be met.

And the FSA was advised that the old projections were in any case out of line with economic reality.

It said the new projection rates will be cut to 2%, 5% and 8% to make sure customers are not given exaggerated or potentially misleading information.