From September, unit trust companies will have to tell savers the actual cash amount of charges levied on their funds and what they get back at the end of a given investment period.
The charges will be based on assumed growth rates of 7.5 per cent a year, or 9 per cent in the case of tax-free personal equity plans.
The PIA's decision brings to a close a rearguard battle waged by the pounds 120bn unit-trust industry against the new disclosure rules. For several years its trade body, the Association of Unit Trust and Investment Funds, argued that the existing system, whereby savers are told that a certain percentage is levied on their total funds each year, was perfectly adequate.
The industry, which has attracted an average of pounds 5bn in investments each year since 1993, also argued that to force it to base its charges on nominal growth rates could mislead savers.
However, many industry observers argued that simply saying a 1 or 2 per cent charge is levied on a fund each year disguises the true amount being taken from it. For years, life insurers complained that they were losing business to unit trust providers because they alone were being forced to tell savers the real cost of their products.
A spokeswoman for the Association of British Insurers, the industry trade body, said: "We are very pleased with the announcement. It seems to be moving one step nearer to equivalence with life and pension products."Reuse content