Firms told to use lower investment return forecasts
Firms that sell investment policies - such as personal pensions and share Isas - to the public will have to use lower projections of future returns.
The Financial Services Authority (FSA) says firms should do this anyway, if investments are unlikely to meet the maximum projections currently allowed.
But it says many firms are failing to make such adjustments, so it is making lower projected rates mandatory.
In some cases the new projected rates of return may be as low as 1.5% a year.
"Investors need to be able to trust information they receive and any suggestion as to how their investment might grow in future must not be misleading," said Sheila Nicoll, director of conduct policy at the FSA.
"We are proposing lower growth rates which firms may use but we are reinforcing the fact that these are maximum levels.
"Providers and advisers need to take a long, hard look at the rates they use, taking account of the underlying assets they are dealing with," she added.Compulsory
The projections have to be used for investments such as personal pension plans, stocks and shares Isas, tax free savings plans, endowment policies, investment bonds and "whole of life" life insurance policies.
Money-purchase pension schemes, unit trusts, open ended investment companies and investment trusts are not required to use any projections.
Sales literature from companies has to give examples of how policies might grow, using three different rates.
Policies with tax advantages, such as personal pensions and stocks and shares Isas, can currently display projected returns of 9%, 7% and 5%.
These will be cut to 8%, 5% and 2%.
Policies without any tax advantages, such endowment policies and investment bonds, can use projection rates of 8%, 6% and 4%.
These too will be cut, to 7.5%, 4.5% and 1.5%.
The rules exist to stop financial firms making exaggerated claims about the likely returns they could earn for their customers.
But the FSA pointed out that the rates which are used should, in any case, be in line with the realistic expectations for the policies, if they happen to be lower than the maximum rates laid down in the FSA rules.Lower returns
The lower rates of return used in standard projections were suggested in a report by accountancy firm PwC which was commissioned by the FSA and first published in February.
The projection rates had last been reviewed in 2007.
The conclusion of PwC in its latest review was that economic growth in the next 10-15 years would be lower than previously estimated.
It suggested an average growth rate of just 2.25% a year, and that the returns for investors in shares, property and government bonds would also be lower than before.
PwC said: "Following our review of academic research, updated market information and broader economic developments, our best estimate for the single intermediate rate of return is 6%, in nominal terms, with a range around this figure of 5¼% to 6½%.
"We therefore consider the current 7% intermediate figure to be too high and suggest the FSA brings this figure down to within the range of 5¼% and 6½%."