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New FSA ruling increases pressure on endowments

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  • 01/07/2003
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Things can only get worse in the endowment market with the Financial Services Authority's (FSA)...

Things can only get worse in the endowment market with the Financial Services Authority’s (FSA) ruling that life companies have to reassess the projection rates they are giving for their products.

The FSA said it was happy that companies continued to use the prescribed rates of 4%, 6% and 8%, but stated: ‘It is important to recognise however that these rates assume a significant weighting of equities within the packaged investment product.

‘Accordingly, where a firm considers that these rates would overstate the investment potential of a particular product ‘ for example, where its asset mix contains a higher element of bonds ‘ then, under FSA rules, it must use reduced rates.’

The mix of the investment portfolios has changed so much in recent years due to the poor performing stock market.


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