FSA is consulting on changes to the investment return assumptions (projection rates) in the Conduct of Business sourcebook (COBS). It proposes to lower the projection rates that firms must use when communicating with investors on certain retail investment products. FSA has noted that some firms do not comply with the current recommended percentage return rates, and is consulting on amending its rules in two respects:
- to require firms always to use appropriate projection rates, subject to the maximum rates set out in FSA’s rules; and
- following a market study, to lower the three projection rates currently required for tax-advantaged and tax-disadvantaged products.
Additionally, and together with the Financial Reporting Council (FRC), FSA is consulting on:
- proposals for updating the mortality assumptions to be used when illustrating a personal pension, including implementation of the European Court of Justice (ECJ) ruling on gender equality in insurance;
- the introduction of a separate Consumer Price Index (CPI) assumption for transfer value analysis (TVA) when benefits under a defined benefit (DB) pension scheme are compared with the possible benefits under a personal pension scheme.
FSA wants comments on its mortality assumptions proposals by 29 June and on its TVA and investment return assumptions proposals by 31 August. It invites responses directly to FRC on the proposals on Statutory Money Purchase Illustrations. (Source: FSA Consults on Lowering Projection Rates)
