MSE News: Tougher rules for investment and pension firms

Firms which offer investments such as personal pensions and Isas face tougher rules to ensure they give people a more realistic prediction of potential returns.

The projections are not predictions and are not allowed to be referred to as such.

Firms are meant to give three different rates of return, and revise them down if a product appears unlikely to achieve this.

But the FSA is consulting on plans to strengthen these rules after finding providers often fail to comply with this requirement.

The financial press appears to have understood this differently to MSE. The change to rates reflecting asset classes is quite new and has only been in a short period. That is not changing. The only thing that is happening is that the maximum rates are being proposed to be lower. The FSA reviews projection rates periodically and tells the firms the maximums they can use.

These are not tougher new rules. These are just part of the periodic review on projection rates that can be used to ensure they remain realistic.

It is not an investment crackdown.

Has someone been letting Daily Mail writers loose on the MSE articles?

I don't know which is most misleading for consumers - firms using 'official' projection rates which have proved over optimistic on average, or letting them go back to making up their own minds on projections. For example using their historical achievements (although as everyone knows past performance is no guide to the future ... unless you think something can be learned from history).

If official projection rates keep being reduced it will seem that some of the higher charging products are more likely to promise a loss than a gain, especially at the lower estimates of investment performance. Will it be a good thing if the average Jo(e) is put off high risk high charging products unless (s)he really understands them?