The Financial Conduct Authority has responded to a recent International Adviser report which discussed whether the regulator should take action and lower the intermediate investment projection limit after a decade of long-term low returns.
Industry players made the case for estimates to be “realistic, understandable and consistent” for clients, but change can only come from the UK watchdog as it is the one in charge of setting the cap.
Currently, the limit for intermediate projections is 5% for tax-exempt products and 4.5% for others; while higher and lower estimates can go 3% above or below the cap.
The FCA told IA that assumptions for projections rules for packaged products – which include pensions and some types of investments – are typically reviewed every four years.
The last review resulted in changes to those estimates, which became effective from 6 April 2019.
A spokesperson for the regulator added: “We require firms to use rates of return which reflect the investment potential of the product. In periods where rates of return are expected to be lower than the caps, firms should already be using rates that are below the cap so that consumers receive appropriate projections.”
