A suite of simple financial products could encourage Britons to save more for retirement and restore faith in banks after a string of mis-selling scandals, a UK government-backed review said on Thursday. Britain said winning back consumers, whose incomes are already being squeezed, will not be easy while experts cautioned that simple products tried in recent years largely failed.
The review was headed by Carol Sergeant, former chief risk officer at Lloyds Banking Group, with members from the finance industry and consumer groups. "When consumers arrive at the financial marketplace there should be simple processes and products available to allow them to make an informed and straightforward decision," Sergeant said in a statement. She proposed several products such as an easy access savings account and a simple life insurance policy. They would be approved by a "Simple Products" accreditation body and stamped with a kite mark for easy recognition.
"We understand that restoring public trust in financial products is not an easy task at the moment," UK financial services minister Mark Hoban said. The financial services industry has been rocked by mis-selling scandals around payment protection insurance (PPI) for loans and the sale of interest rate swaps to small businesses. Compensation from Britain's big four banks, which includes Lloyds, will likely top 9 billion pounds. Charlotte Hill, a financial services partner at Stephenson Harwood, said simple products were an excellent idea but past initiatives had proved disappointing.
The "Sandler review" in 2002, not mentioned directly in Thursday's consultation paper, proposed a suite of simple "stakeholder" products such as pensions. "However, the general uptake of them has been extremely poor and interest from the industry, as well as consumers, has been generally low. The 'simple' products seem to be very similar in concept to the 'stakeholder' products," Hill said. The review estimates the market for simple savings products at 29.4 million adults or 15.5 million households earning 15,000-50,000 pounds. The proposals are out for public consultation before a final report next February.
Consumer body Which?, a member of the review's steering group, said consumers want clearer, concise and jargon-free information on rates and charges. UK insurer Aviva has estimated that the country's gap between what people have saved for retirement and what they will need is 317.5 billion pounds, the largest in Europe.