The news comes after a The Sergeant Review of Financial Products, launched by the Treasury last year, has now reported back after consulting with regulators, banks and building societies as well as the Money Advice Service.
No advice needed
The products, which will be identified with a “Kitemark”, will be available to be bought without the need for advice and are designed to be simple enough to attract people to make provision for their financial future, whilst shopping around for the best deal without being put off by complicated features.
However, whilst the products will be simple in nature with the standards to be set by the British Standards Institute, providers will still be able to compete on price.
The first products to be launched will be:
- An easy access savings account
- A 30-day notice savings account
- A regular savings account
- A fixed term life insurance product
To qualify the product will have to meet various guidelines, contain no surprises for the consumer and pass a “robust accreditation process” whilst the language used in all literature will have to be simple and consistent, to make it easier for consumers to compare.
Carol Sergeant, who chaired the review, said: “We have known for a long time that being able to manage your finances effectively leads to increased well-being and a better quality of life, at every given level of income. I hope that the Simple Financial Products initiative will make it easier for people to understand and compare the key financial products they need and make good choices with confidence.”
It is hoped that the simple nature of these products will encourage consumers, previously put off by the complexity of many savings and insurance plans, to start to save or make provision for their family or financial dependents should they die.
Despite the obvious benefit to consumers of a simple product, which will make it easier to compare options on a like for like basis, personal finance experts have questioned whether consumers will embrace the new ‘no frills’ savings accounts and life insurance products.
The last Labour government tried to introduce a similar system. The CAT scheme, which stood for charges, access and terms, failed to take off and did little to encourage people to save or make provision for their financial future.
Reacting to the scheme, Simon Rose, of Save Our Savers, said: “When the policies of the Government and the Bank of England appear to be doing everything to stop people saving, the Treasury’s efforts seem annoyingly irrelevant.”
“Savers have lost £220bn in just four years to low interest rates and inflation. We need proper competition, for taxes on savings to be scrapped and for market-set interest rates, not for the price of money to be set at a zombifying level by the Bank of England.”
However others, such as Richard Lloyd, Executive Director of consumer group Which?, were more positive: “Consumers should not have to tackle pages of terms and conditions and they should be told clearly what rates and charges apply, so they can shop around more easily and get a fair deal. We now look to the financial services industry to deliver on these proposals.”