Lautro sets out tighter rules for unit trusts

UNIT TRUST investors will have to be told what they might get back from their investment if they cash it in within five years, under proposals published by the Life Assurance and Unit Trust Regulatory Organisation yesterday.

The plan was attacked by the Unit Trust Association as regulatory 'overkill'.

Lautro proposes that unit trust companies quote returns after one, three and five years, assuming standard rates of growth minus the company's management expenses. These figures would be the equivalent of the early-surrender values that Lautro has ruled life insurance companies must quote to investors.

Philip Warland, director-general of the UTA, said this sort of projection was inappropriate for unit trusts. Investors were free to cash in their units at any time, unlike long-term life insurance-linked savings contracts, such as endowment policies, which were designed to run for many years, with investors incurring severe penalties for cashing in early.

Colin Hawtin, senior policy officer at Lautro, said that the Government, when demanding the overhaul of the regime for disclosure of investment expenses, had stipulated that investors be able to compare different types of product.