LV= says it welcomes further FSA moves to press providers into using realistic growth projections for retirement products.
Customer outcomes can be "significantly" overstated when standard, not realistic, growth rates are used in projections, the insurer says its own data suggests.
The FSA this week sent a letter to all compliance officers citing concern over the reliance on a caveat to suggest growth rates may overstate the potential benefits.
The FSA letter says: "Many firms appeared to seek an actuarial opinion on the general appropriateness of the standard rates, rather than taking a bottom-up approach to determine if the actual asset mix of the fund or product justifies these rates.
"Firms rarely concluded that lower rates might be more appropriate."
It concludes: "Where the asset mix of funds or products does not justify the use of the standard rates, you must revise the rates downwards. In doing so you must also ensure that you have in place a rigorous approach for determining appropriate projection rates."
Ray Chinn, head of pensions for LV=, says: "Setting realistic expectations of future benefits is a key part of putting customers first when it comes to retirement products, and is crucial for the industry to start to rebuild trust."
"LV='s approach to assessing growth rate projections is designed to provide a more realistic view to customers, and not overstate future benefits, in order to put the customer first.
But many providers are still lagging behind, he says.
LV= cites an example of a 45 year old male retiring at 65 with an initial investment of £200,000 in the LV= Flexible Transitions Account.
Using standard mid growth rate of 7% the projected retirement fund for a 45 year old male retiring at 65 is £708,000, compared to £457,000 using realistic mid growth rate of 4.75%.
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