Rachel Reeves under fire for using 'unrealistic' figures

Rachel Reeves has been accused of using "unrealistic" and potentially misleading figures to nudge millions of savers into risking their money in the stock market.

The criticism centres on new Treasury projections, released as part of the Chancellor's flagship Leeds Reforms, which claim that investing just £2,000 in stocks and shares could grow to £12,000 in 20 years - a sixfold increase.

The figures were highlighted as part of a push to encourage banks to steer savers out of low-interest accounts and into riskier stock market investments.

The Government said the comparison was based on the average 9.64% annual return from a stocks and shares ISA, versus just 1.5% from traditional savings accounts.

But industry figures have warned that the assumptions behind the projections are dangerously optimistic and would fall foul of rules applied to financial advisers and pension providers.

Steven Cameron, of pension provider Aegon, told the Telegraph: "To get from £2,000 to £12,000, which is what was in the Government's release, you'd need a compound annual return of 9.37% after charges.

"If charges were 1%, you'd need a return before charges of 10.37%. That looks pretty optimistic as an estimate of likely returns over the next 20 years."

He added: "As a financial services industry, it would be very difficult for us to use figures like this, without many caveats and context. And in some cases, it just wouldn't be allowed by our regulators."

Strict rules set by the Financial Conduct Authority (FCA) state that financial promotions must be "clear, fair and not misleading". Providers must also show three projections - 2%, 5% and 8% - for expected investment performance, alongside clear disclaimers that past returns are no guarantee of future growth.

Aegon calculated that, using these official benchmarks, a £2,000 investment would at most grow to £7,739 - far short of the £12,000 cited by the Chancellor's team.

Mr Cameron said: "We very much welcome targeted support and the ability to go further to suggest courses of action to groups of customers, such as those with excess cash. But we also need to be realistic in the claimed benefits of investing some of this."

Sarah Coles, of stockbroker Hargreaves Lansdown, also raised concerns over the Government's selective comparisons.

She said: "The choice to compare investment returns to a miserable rate on offer from a high street giant is valid, given how much of people's savings is still languishing in these accounts. But the fact is they could do much better by moving to a competitive rate with an online bank or savings platform, and making this clear would have given a more holistic view of their options.

"Having said that, the Government is making a vital point that over the long term, investments will outperform cash in the vast majority of cases."

Ms Reeves, who is under pressure to boost economic growth, has said she wants to reform savings and Isas to channel more funds into UK businesses. A proposed "targeted support" scheme, due to launch in April, will allow banks to prompt customers with large cash balances to consider moving into stocks.

In her Mansion House speech last week, Ms Reeves acknowledged that many people are put off investing by confusing rules and heavy warnings.

She said: "For too long, we have presented investment in too negative a light, quick to warn people of the risks, without giving proper weight to the benefits, and our tangled system of financial advice and guidance has meant people cannot get the right support to make decisions for themselves.

"That is why we are working with the FCA to introduce a new type of targeted support for consumers ahead of the new financial year."

Although plans to slash the cash Isa allowance from £20,000 to £4,000 have been shelved, Ms Reeves is still considering "changes" that could limit the amount of money Britons can shelter from the taxman each year.