MSE News: Government demands simple savings

Former_MSE_Guy

This is the discussion thread for the following MSE News Story:

"Treasury Financial Secretary Mark Hoban says the vast choice and multiple product features make it difficult to compare ..."

Read the full story:
Government demands simple savings

HairY

Sounds nice and vague.

I love that on the one hand they're saying there's too much 'choice' and, on the other, not enough competition.

dunstonh

The non politically correct way of putting it is that the current distribution channels are not profitable enough to cater for the bottom end of the market. The way charges have continued to fall over the years, some of which imposed, some of which natural through computerisation, has meant that the lower end of the market hasn't been serviced with products that are more suitable for them apart from perhaps the stakeholder pension (which is no longer the cheap option compared to the modern personal pensions).

The aim is to be have a range of simple products which may cost more but can be sold without any or very little regulation. In effect, it will allow salesforces to return with an insurance agent selling basic, expensive and often limited products but in volume. I believe the term the FSA used a few years back when looking at this was that the products would be "better than doing nothing".

The theory is fine but it will probably result in the cycle we saw before where salesforces catering for the lower end of the market started to want to build into the middle net worth and high net worth and you end up with people who would be better serviced with quality products being sold basic ones.

Many people will recall the insurance agent coming round and getting those 10 year savings plans going or forcing you to increase your pension. The products werent great but at least they got people saving and they did get people to top up their pensions. Since their demise, most people havent bothered topping up their pension or starting long term savings/investments.

The return of basic and expensive products has been coming for some years. I suspect the Govt are using the information already obtained under the previous Govt.

Old_Wrinkly

Checks calendar ... No, not April 1st ...
If the Government is serious about Savings, then they should start with the Banks they own (in full or part).

ETA: It would be useful if the MSE team could give us a link to these 'consultation proposals'.

Hmm, I guess it's this ...
http://www.hm-treasury.gov.uk/d/simple_financial_products_consultation.pdf

Loughton_Monkey

Why don't they do something innovative like making comparison a doddle by forcing institutions to quote an AER using a standard formula?

I know what you're thinking. This is too complicated, right?

The only other thing I might suggest is to request that companies state something like "Includes bonus of 2% in first 12 months, after which the rate will drop to standard variable rate."

A totally different, and even more innovative solution - and one I have suggested before - is that everyone who wants to save should get a "License to Buy Savings Products". This will come only after a rigorous written examination (multiple choice) where they have to state whether or not they can read, whether or not they have an IQ larger than their age, and answer simple questions on what is meant by "Interest", "Deposit", and Cash in your Pension".

Those who cannot get such a license will have to leave what money they have under the mattress, or it may even force them to use it to pay off their 27.9% Store Card credit balance.

Consumerist

HairY wrote: »

Sounds nice and vague.

Yes, sounds like another case of complaining about the effects of competition.

When there were complaints about the energy monopolies, they were opened up to competition. Now there are complaints about too many "confusing" energy tariffs.

When there were complaints about the telephone monopoly, it was opened up to competition. Now there are complaints about too many "confusing" phone tariffs.

On the savings issue, I get the impression that government only wants to pay lip service (i.e. will not force any action) to the provision of "fair" savings accounts - whatever that is supposed to mean.

It is unfortunate for the many that it is necessary to monitor interest rates (or energy and telephone tariffs) to get the best deal. The few who take the trouble reap the benefits.

It seems to me that the many will not be happy until all of us get the worst deal. After all, that would then be "fair", wouldn't it?

opinions4u

The savings market is more competitive than it has been for decades and the choice for consumers is excellent.

I wonder what causes most complaints with savings accounts? I'd hazard a guess that ISA transfers are right up there and who designed the rules for those? Ah yes, HM Government. If not, it's low interest rates. Ah, that's official Government policy isn't it!

If you want a simple easy access savings account, your local bank or building society do one. If you want to compare rates, the internet allows you to do it in seconds. If you want to sacrifice access for a higher rate, the choice becomes more complex, but the internet allows you to easily research the pros and cons or ask the questions on sites like this.

Governments should get their own house in order before dabbling in trying to change the savings market.

Loughton_Monkey

opinions4u wrote: »

The savings market is more competitive than it has been for decades and the choice for consumers is excellent.

I wonder what causes most complaints with savings accounts? I'd hazard a guess that ISA transfers are right up there and who designed the rules for those? Ah yes, HM Government. If not, it's low interest rates. Ah, that's official Government policy isn't it!

Herein lies a dilemma. Very competitive means 'complicated' which in turn means a huge swathe of the great unwashed not having the knowledge to shop around and/or understand the most simple concepts. The Government cannot have it both ways.

Certainly ISA transfers must be a big cause for concern, but judging from some of the posts here, I suspect someone in Whitehall is getting issues like:

- I put my £10K in XBank 5 years ago and only just found out I'm getting 0.1%.........
- I put it in at 2.8%, and no-one told me it had dropped down to 0.5%.......
- My Granny has £25K in a miserable account. She would like 3% but cannot use the Internet....
- They told me I'd get 5% by saving £250 a month, but £3,000 at 5% is £150 and not the miserable £72 they paid me.....
- I just had to withdraw £50 to pay a speeding fine, and now I find I lost all my interest......

Still. It's nice to see the Geovernment itself offering nice simple products, like NS&I Direct Saver (1.75%), Easy Access Saver (0.3%), and "Investment Account" (0.2% raising to a mammouth 0.3% for over £25K)

hugheskevi

Sounds like the Sandler Review all over again...wiki article for anyone who doesn't remember it.

There must be a very big warehouse of reinvented wheels somewhere in Whitehall...

pqrdef

Generally safe to assume that if the Treasury (as opposed to the OFT) comes up with something like this, they've been put up to it by their friends in the City.

Got to keep that revolving door turning.

Milarky

opinions4u wrote: »

I wonder what causes most complaints with savings accounts? I'd hazard a guess that ISA transfers are right up there and who designed the rules for those? Ah yes, HM Government. If not, it's low interest rates. Ah, that's official Government policy isn't it!

Hear, hear! The real motivation for launching 'consultations' is probably to give the appearance of action and to draw attention away from this inconvenient truth.