Advert Projections

Invest just £45 per month now, collect £46,145 in 15 years time is an example of another well-used technique. Research into investment performance has failed to find any reliable methods of predicting future growth - what will happen to your investment is anyone's guess. Under the new rules, projections are still allowed and are commonly used in the sale of life insurance and pensions. But now projections must be given using standard growth rates, so the advertiser can't make his product more appealing simply by basing forecasts on optimistic assumptions about future growth.

Projections must also be based on standard charges.

So companies selling the same sort of products will quote the same projected returns - you can't use projections to compare different companies' products. If projections are made, they must be accompanied by a statement about the effects of inflation to show how inflation eats into the buying power of your investment.

Ti. Projections tell you very little and shouldn't influence your 1 choice of investment or company. Unfortunately, the statement about inflation is long and difficult to use - ask the company, salesman or your adviser to do the sums for you.

Risk warnings Advertisements must also warn you if the value of your investment can fluctuate - for example, as with unit trusts and unit-linked life insurance. If you can't afford to lose any of your capital, or if you might need money back in a hurry (perhaps when unit prices are low), you should avoid investments carrying this warning.

In advertisements which invite you to take up an offer - for example, by filling in a coupon included as part of the advertisement - other warnings may be required. If a deduction for charges or expenses would fall heavily in the early years of the investment, this must be made clear. This could be the case with, for example, many regular premium life insurance policies.

Investments with this warning would not be the place for money that you couldn't leave invested for the long term.

You must also be warned if the return on the investment depends on what profits are made and how they are distributed - as with with-profits life insurance policies. In some circumstances, there might also be a warning that an investment is unsuitable for inexperienced investors if, despite the warning, you're still attracted, you'd be wise to get the help of a professional adviser.

Commendation The word 'commendation' is used to describe any statement in an advertisement made by someone commending or endorsing a product. Under the rules, any quotation or statement used in this way must fairly represent the views of the person to whom they are attributed. If the person is an employee or associate of the company in other words someone who has a clear vested interest in the product and whose commendation might reasonably be thought to be partial the advertisement must say so.

WARNING The rules say nothing about the use of a well known person to add impact and credibility to a product being advertised, and who might by implication, if not in spoken word, seem to be commending the investment. But bear in mind that usually they'll also have a vested interest in the product because they are being paid a fee.

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Advert Descriptions of Insurance

The description can be applied only to those investments which are genuinely tax-free, such as National Savings Certificates or friendly society bonds; with these, no tax is payable either by you or by the organisation running the investment. On the other hand, the proceeds of some types of life insurance may be tax-free in your hands but the insurance company itself will already have paid, or set aside amounts to cover, income tax, corporation tax and capital gains tax.

You can't reclaim the tax paid by the company.

In such instances, the words 'tax-free' may still be used... see: Advert Descriptions of Insurance

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