Research from the FSA with PricewaterhouseCoopers has supported a reduction in rates of returns firms are required to use when issuing projections of prospective future investment returns.
The projections apply to retail investment products such as personal pensions and life products which do not fall within MiFID (Markets in Financial Instruments Directive).
They are currently based on an asset mix of 67 per cent equities and 33 per cent bond investments.
The proposal is for rates to be revised down from seven per cent to between 5.25 per cent and 6.5 per cent.
Peter Smith, head of investments policy at the FSA, said: “It is crucial that projection rates are set at a realistic level so that investors are not misled. Today’s independent research indicates that our maximum projection rates should be reduced.
“We are seeking views on the range of rates so investors receive a reasonable indication of what they can expect from their investment.”
Projection rates are periodically reviewed to decide the appropriateness of the rates and were last reviewed in 2007, prior to the financial crisis.
The PwC report read: “Four years later the economic and market environment has changed substantially and this presents us with a number of distinct challenges which were not present in 2007.
“Most commentators expect the UK economy will return to trend growth and normalised interest rates, albeit slowly over a number of years. We have therefore needed to form a view about the short-term outlook for the economy and financial markets, as well as a longer-term view.”