In the financial services industry, projection rates for growth on insurance or investment policies must all be quoted at the same three rates, by all companies.
This is imposed by the Financial Services Authority and aims to make sure that investors can compare like for like.
All companies currently use projection rates of 4%, 6% and 8% for insurance and investment related policies. For pension policies and those with tax benefits, like Friendly Society policies, the rates are slightly higher at 5%, 7% and 9%.
All companies make different charges on their policies and these are taken into account when you obtain a quote. But, the rates of projection are always the same.
Over the years, projection rates have decreased because they are meant to be realistic in terms of the UK's economy. The FSA is said to be keeping the rates under review and they have said that rates will be reviewed if needed.
A review of the projection rates could mean either totally abolishing the top rates of 8% and 9% or just reducing all three.
Top Tip: If you are taking policies out at the moment to provide you with a set amount at some point in the future, make sure that you understand what realistic rates of growth are. For example, if you do not want to take any risk with your money, you should not be looking for returns of 8 or 9% in the current investment climate. Use the rate of interest paid on your bank account as a guide.