Pension pots to plunge under new rules Although the change will give savers a nasty surprise when they open statements, the FSA said that it is pushing through the change to give people a more realistic view of what their investments will be worth. While the change will not reduce a person's actual savings, it will significantly dent the paper value of their pots and could lead to millions of people changing their retirement plans. An FSA spokesman said the regulator wants to stop companies giving savers the "false impression that they are likely to get huge returns." The FSA said that a central rate of 7 per cent is "inappropriate" given the current economic uncertainty. "We think that people who are making a long term investment deserve to have a pretty good indication of what they are likely to get back," the spokesman said. Pension experts said that the lower growth forecasts will give a "reality-check" to savers. Joanne Segars, the chief executive of the National Association of Pension Funds (NAPF), which represents the pensions industry, said: "We are in a low growth environment and have been for some time. It is pointless letting people hope for high returns that might never materialise. This is a reality check. Tom McPhail, head of pensions research at Hargreaves Lansdown, the pension company, said: "This is a dose of cold economic reality for investors; the FSA is telling them to expect lower growth, which means that for a given level of pension they need to save more and that means making more compromises over how much they can afford to spend today." The FSA announced the changes following an independent review by accountants PricewaterhouseCoopers (PwC) and a consultation with financial firms. At the moment, pension statements show the value of people's funds if they grow by 5 per cent, 7 per cent and 9 per cent a year. The central 7 per cent figure is the "intermediate projection rate." After the changes, the rates required by the FSA will be cut to 2 per cent, 5 per cent and 8 per cent, with 5 per cent as the intermediate projection rate. The FSA has cut the forecasts because investment returns have fallen over the course of the financial crisis. For example many pension funds have switched their investments from volatile stocks and shares - equities - into Government bonds which are safer but have lower financial returns. The spokesman said: "Companies are moving away from equities and toward lower-yielding assets such as bonds so an intermediate rate at the lower end of the range provides the most realistic indicator of what an investor might receive from their investment." The NAPF's Ms Segars said that the changes will avoid savers getting nasty surprises. She said: "People often struggle to plan their retirement, and these new rates should offer a more helpful and realistic guide. The revised rates are still estimates and are not a promise of what the pension will look like. The best way for people to manage that uncertainty is to give their savings a regular MOT to see how they are faring. The UK is not saving enough for its old age, so it is important to help people see how much they need to salt away. A reformed simpler, flat-rate state pension will also enable people to make stronger retirement plans. The new projection rates will come into force in April 2014 but pension firms will be able to comply with them in promotional literature from April 6 next year. The FSA said that it has only changed its standard projection rate twice since 1988.