MSE News: Government continues simple financial products crusade

oldvicar

SnowMan wrote: »

I think my gripe with the NS&I certificates were that they were offered tax free at all. Would it not have been better if they were offered at a slightly higher rate (to allow for the average tax paid) and were taxed at individual's marginal tax rate in the normal way as other (non ISA) savings income?

If you want to alllow people to save more in a tax free environment (and I emphasise if) then just increase the cash ISA limit and allow people the choice of what to invest in.

I agree, I would prefer a taxable offering, as long as it was at least as good for basic rate taxpayers.

Eco_Miser

SnowMan wrote: »

I think my gripe with the NS&I certificates were that they were offered tax free at all. Would it not have been better if they were offered at a slightly higher rate (to allow for the average tax paid) and were taxed at individual's marginal tax rate in the normal way as other (non ISA) savings income?

Better for whom?
As tax-free income, they attract the savings of 50% rate payers (who have presumably already maxed out their ISAs); at a higher interest rate, but taxable, they would mostly attract the savings of the non-taxpayers, for whom ISAs are mostly pointless.

CLAPTON

SnowMan wrote: »

I can't remember exactly how it was advertised but in principle I certainly wouldn't ban that. An inflation linked account meets a genuine need so is OK in my book.

Any account that was paying RPI + 0.5% (say) would be OK as long as it wasn't dressed up to look like it was RPI +2% (say) and was set up in as clear a way as possible. I remember a Post Office RPI linked account fairly recently being dressed up to make it look better than it was - that would not be acceptable.

it's a stepped bond that you specifically said you would ban

it's amazingly complicated; you will recall the NS&I initial announcement had to be withdrawn as they got it wrong (even their own guys find it complicated)

just check out the threads on this site; endless discussions about the exact way it worked
very complicated if inflation is negative

just shows how banning things can be complicated and against the best interest of many people

SnowMan

CLAPTON wrote: »

it's a stepped bond that you specifically said you would ban

it's amazingly complicated; you will recall the NS&I initial announcement had to be withdrawn as they got it wrong (even their own guys find it complicated)

just check out the threads on this site; endless discussions about the exact way it worked
very complicated if inflation is negative

just shows how banning things can be complicated and against the best interest of many people

Doesn't show anything of the sort in my view.

I think you are arguing that un-necessarily complicated products that despite this still offer a good return and so are popular shouldn't be banned. I would say ban them. The institution which is offering the complicated product which it is clearly doing to try to attract funds would no doubt then offer a simpler product that also offered good returns and would also be popular. So not against the best interest of consumers at all in general as they would then still get a good return through a simpler product.

What is against everyone's interests are over-complicated products which require some people to waste large amounts of time looking through the terms and conditions while others fail to understand the product at all and get conned. Yes I guess those who have the capability to differentiate between the complicated products receive a subsidy of an extra return from those people who aren't able to understand the product such as those with learning difficulties or dementia; but personally I would prefer not to receive that subsidy.

If the national savings product was overly complicated then it should have been banned, however inflation linked products that aren't overly complicated shouldn't be banned . As I said I can't remember that much about the NS and I product so can't sensibly comment on that individual product.

opinions4u

1) Simple product:
Savings account unlimited withdrawals. Variable rate. 0.50%.

2) Quite simple product:
Savings account unlimited withdrawals. Variable rate 2.00% for a year, dropping to 0.50% after a year.

3) More complex product (but still simple enough in my mind):
Savings account, 4 withdrawals a year. Variable rate 2.50% for a year, dropping to 0.50% after a year with unlimited withdrawals.

4) Quite simple product:
Term deposit paying 3.50% interest fixed for two years. No withdrawals allowed. Closure allowed subject to a reduction in interest.

5) Very simple product:
Term deposit paying 3.60% interest fixed for two years. Withdrawals and early closure not allowed.

Where does the Government draw the line?

Simple products exist already. Banning more "complex" products isn't the solution. So what are they trying to achieve?

jimjames

dunstonh wrote: »

However, there is an increasing trend of people who are not vulnerable, who are probably lazy and know enough about what they are doing and but look to complain or go for compensation by making out they are vulnerable.

The lack of personal responsibility that exists in society today is not a good thing. If we keep dumbing down (which we have been) rather than teaching upwards, then there is really no hope for the long term.

As with the old saying you can take a horse to water but can't make them drink.

There is plenty of information out there and for most people who are internet savvy and of reasonable intelligence there is no reason why they cannot research and find good/better deals. I think the lazy reason has hit the nail on the head or even thinking that each amount is insignificant. Add a lot of small amounts together and it makes something big.

I was at a meeting with some fairly senior executives in a few weeks back looking at energy switching. I was stunned to find I was the only one in the room that had switched supplier. Hopefully people at this level wouldnt claim lack of knowledge as a reason but seem happy to throw away £300+ per year for the sake of a few minutes research.

Add that up across different products and you could have several thousands being wasted which would be an easy way to boost your income.

CLAPTON

SnowMan wrote: »

Doesn't show anything of the sort in my view.

I think you are arguing that un-necessarily complicated products that despite this still offer a good return and so are popular shouldn't be banned. I would say ban them. The institution which is offering the complicated product which it is clearly doing to try to attract funds would no doubt then offer a simpler product that also offered good returns and would also be popular. So not against the best interest of consumers at all in general as they would then still get a good return through a simpler product.

What is against everyone's interests are over-complicated products which require some people to waste large amounts of time looking through the terms and conditions while others fail to understand the product at all and get conned. Yes I guess those who have the capability to differentiate between the complicated products receive a subsidy of an extra return from those people who aren't able to understand the product such as those with learning difficulties or dementia; but personally I would prefer not to receive that subsidy.

If the national savings product was overly complicated then it should have been banned, however inflation linked products that aren't overly complicated shouldn't be banned . As I said I can't remember that much about the NS and I product so can't sensibly comment on that individual product.

No, I'm not arguing such a case.
No, I'm not arguing that you are the best person to decide what is and or what is not 'complicated'.

I happy for you to choose not to use products or services that aren't suitable for people with learning difficulties or with dementia; I would like you to respect my choice to use loads and loads of such products and services.


it's probably true that

70% or more people don't understand a simple percentage

95% of people couldn't work out how much interest you would earn if you save £50 per month for 12 month at 8% APR

90% of people don't understand inflation

so should we ban any talk of percentages and ban regular savers and ban inflation linked savings?

Ark_Welder

SnowMan wrote: »

Any account that was paying RPI + 0.5% (say) would be OK as long as it wasn't dressed up to look like it was RPI +2%

The last issue of the NS&I ILSCs was dressed-up to look like RPI + 0.5%: the 0.5% figure is achieved only if the certificates are held for the full term. Cashing in before the end of the term will result in a return that is less than RPI + 0.5% AER: the gross yield for each year is something like 0.25%, 0.35%, 0.4%, 0.65%, 0.85%.

SnowMan

CLAPTON wrote: »

No, I'm not arguing such a case.
No, I'm not arguing that you are the best person to decide what is and or what is not 'complicated'.

I happy for you to choose not to use products or services that aren't suitable for people with learning difficulties or with dementia; I would like you to respect my choice to use loads and loads of such products and services.


it's probably true that

70% or more people don't understand a simple percentage

95% of people couldn't work out how much interest you would earn if you save £50 per month for 12 month at 8% APR

90% of people don't understand inflation

so should we ban any talk of percentages and ban regular savers and ban inflation linked savings?

I don't respect your right to have a complicated product available to you if having complicated products causes significant detriment to others. It is about balancing the rights of all not just you. As Martin said in his blog people with learning difficulties and others who don't understand complicated products through no fault of their own have rights and I would agree with that.

However it is not down to me to decide what products should be available it is down to the rules that a democratically voted government of the day decide. However I and you are entitled to give our own views on what products should be available.

The test, in my view if I am allowed to express it, to decide whether a product or marketing is acceptable is whether the product or marketing is overcomplicated and whether it is intended to deceive people, not whether people understand it. However simple you make products some people won't understand. However the simpler a product is the more chance that more people will understand a product.

Percentages, regular savers and inflation linked savings are not in themselves there to complicate or deceive so no I wouldn't ban them unless they were set up or used in a way that was intended to deceive etc.

SnowMan

Ark_Welder wrote: »

The last issue of the NS&I ILSCs was dressed-up to look like RPI + 0.5%: the 0.5% figure is achieved only if the certificates are held for the full term. Cashing in before the end of the term will result in a return that is less than RPI + 0.5% AER: the gross yield for each year is something like 0.25%, 0.35%, 0.4%, 0.65%, 0.85%.

Thanks for the clarification. It does appear from that it wasn't advertised very clearly and had the potential to mislead.