The government has launched a consultation proposing an industry and consumer-led development of a new category of simple financial products, which would be non-advised.
They should be similar in concept to the ‘essentials’ or ‘basic’ ranges offered in supermarkets, the government said.
Products should not be subject to price-caps, and provision should be voluntary for providers, the consultation proposed.
It will also consult on whether the principles behind the “RU64” rule in relation to stakeholder pensions could be transferred to the new simple products.
This requires advisers to benchmark against a stakeholder pension and to justify why a non-stakeholder product is more suitable than a stakeholder product for an individual’s circumstances.
“This rule is widely credited with reducing overall charges for personal pensions,” the Treasury stated. “The Government would like to explore how the principle behind RU64 could be introduced with the new regime of simple products.”
The government will also re-examine the role that existing stakeholder products play in the savings market place.
It adds: “There is the potential for duplication between the old stakeholder products and the new simple products. The government is keen to
consider whether to continue to keep the regulations around stakeholder savings products.
“The government believes there is a strong rationale for retaining stakeholder pensions. Pensions are not an early target for development of simple products. While the take-up of stakeholder pensions has been limited, stakeholder pensions do provide an “off the shelf” option for people who want a private pension.
“While the pension landscape will be changing significantly with the introduction of the NEST, the government is minded to continue stakeholder pensions.”
The government will also consult on the basic advice regime, through which stakeholder products can be sold.
“The FSA reviewed basic advice in 2008, when it concluded that the regime should be retained. While considering the evidence on stakeholder savings products, the government would welcome thoughts on the basic advice regime.”
Hoban says simple financial products will help promote personal responsibility, enable consumers compare products and understand product features more clearly. He adds the proposals will also help to encourage competition between providers.
“The government is committed to helping consumers take responsibility for their finances. In order to do this they need to be able to make sense of the huge range of financial products in the market,” Hoban says.
“Simple financial products will help them to do that, by providing a safe choice and a common benchmark against which other products can be compared.”
The government is now seeking input from consumer groups, the financial services industry, and other interested parties, to develop simple products further.
Which? chief executive Peter Vicary-Smith, says: “For too long the financial services industry has traded on complexity, rather than offering simple, transparent products that consumers need. The government must give the new Consumer Protection and Markets Agency the power to either set minimum standards or to ensure that it’s easier for customers to compare products.”
