There are many financial engineers around who are keen to pretend that they can beat the market, and provide boom-time returns in a downturn. It just isn't possible, without taking big risks.

Sir Howard Davies, Financial Services Authority

The Bank has cut rates seven times this year, and the base rate now stands at only 4%.

While this has been good news for people with mortgages and other debts, it has been bad for savers who have seen the returns on their money dwindle.

This has led many, often elderly, people who look to their savings to provide an income to consider other financial products promising better returns.

Seduced by adverts

But Mr Davies urged would-be investors not to be seduced by adverts promising big returns.

"The income projections sound attractive, but the risks on the capital side are not so prominent in the sales pitch," he said.

"In current markets there is no such thing as a double digit risk-free return. Yet it is surprising how many people seem to forget that when they clip a coupon in the Sunday papers, or have lunch with their broker or adviser."

"Just now there are many financial engineers around who are keen to pretend that they can beat the market, and provide boom-time returns in a downturn. It just isn't possible, without taking big risks."

Housing warning

Mr Davies also expressed concern that some people could be overstretching themselves when it came to buying a house.

"At the FSA we have been concerned for some time that house prices in London and the south east (of England) are as high in relation to the rest of the country as they have ever been," he said.

"And the multiples of salary at which many people have been prepared to borrow continue to rise."

He warned that although interest rates are currently very low "that is no comfort to someone who loses his job and finds he has negative equity in a house he can no longer finance."