Some companies are quoting rates considerably lower (or higher) than 4%, 6% and 8%. Why is this?
Projections illustrating the likely performance of investment policies have been subject to rules set out by regulators since 1988. The purpose of projections is to inform consumers of possible returns from the policies, given certain growth assumptions, and taking into account eligible charges or expenses. These are kept under review and were reduced to the current levels in 2000. However, these rates assume material investment in equity type assets. Where firms identify that their assets have a lower investment potential, they should use lower rates of return. We reminded firms of this in our Dear CEO letter of June 2003.
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