Action to end savers rip-off

by JONATHAN PRYNN, Evening Standard

A huge shake-up of the savings industry is promised to stop millions of people being ripped off by high charges and cowboy sellers or put off by financial jargon.

A report commissioned by Chancellor Gordon Brow n pledges war on the so-called independent financial advisers w ho push unsuitable deals.

Charges on financial products should be low er with less of the profit going to the £800billion-a-year savings industry.

Policies must be easier to understand with warnings in "plain Englishî about the suitability of investments.Rules on taxation should be simplified.

The report from former chief executive of Lloyd's of London Ron Sandler says that high charges on savings products and their "dauntingî complexity are stopping m a ny people, particularly the less well-off, from putting enough money aw ayfor their old age.

Mr Sandler says the reforms are intended to help plug a £28 billion gap between what Britons are saving and what they need to afford a decent retirement.

He proposes a series of consumer-friendly products that savers can buy without having to consult advisers.

Mr Sandler said: "You have to improve trust and you have to improve the simplicity of the industry. Savings levels are insufficient because consumers are confused by this industry and arguably don't trust it."

The publication of the review, which follows scandals such as the Equitable Life disaster and endowment misselling, is expected to lead to the biggest re-organisation of the financial services industry for a decade. Mr Sandler said: "It is of fundamental and growing public importance that Britain should have a savings industry that is both efficient and widely trusted."

The report makes a range of recommendations, many of which are likely to be implemented by the Government.They include:

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The introduction of a new range of simple, easy to understand products with charges capped at one per cent that savers can get out of without crippling penalty payments.These could be sold without the need for expensive advice. The report condemns the current "vast array of subtly differentiated products and complex charging structuresî.

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A clearer structurefor so called "with profitsî products, which are poorly understood by most savers and hard to compare. This would involve more inform ation on their performance, the removal of unnecessary jargon and moreeffective competition,

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An overhaul of financial advisers so that only those who are genuinely independent and not paid by the financial services industry can claim that status. Savers currently have "no understanding of the costs of advice and are unable to gauge its quality".

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Tougher qualification standards for financial advisers.

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Simpler taxation of savings products. The report says that "over time the tax system for retail savings products has become very complex."

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A beefed-up campaign of consumer education so that savers find it easier to understand the savings products they are being sold. T he Association of British Insurers said: "We believe the savings gap is the number one financial issue facing the country. We believe more government incentives are needed to encourage people to save."

The Sandler report will be follow ed on Thursday by a review of the pension industry conducted by Alan Pickering, former chairman of the National Association of Pension Funds. The Pickering report is expected to recommend a major overhaul of the pension industry, particularly a simplification of pension law, in an attempt to stop employers scrapping final salary schemes.

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