MPs call for action to restore savings confidence
A committee of MPs has sharply criticised the performance of the long-term savings industry, and called for action to improve consumer confidence.
The Treasury Select Committee notes a widespread acceptance that there is a “damaging lack of consumer confidence in long-term savings”, this it says is “particularly worrying” given the importance of the £1,900 billion market to the “future prosperity of both savers and the wider economy.”
It calls on the industry to take responsibility for tackling the problems and be “more proactive in identifying activities that threaten to tarnish its image.”
The committee notes that there appears to be little public distrust of short-term saving products, such as cash ISAs, and says a key challenge for the industry is to ensure competitive returns to the saver from long term products.
It recommends that a summary box- similar to the one recommended for credit cards- is introduced to give savers access to “clear, succinct information”. This box, the MPs say, should also give a clear indication of the level of risk associated with the product.
On the industry itself, it suggests that the fee structure should be revised so that fees are more closely linked to investment performance and that consumers should be fully aware of the level of fees charged.
Caution is urged on the move towards individuals being reliant on Independent Financial Advisors (IFAs), with the committee warning that IFAs concentrating on more affluent clients for commercial reasons “risks leaving a large segment of the population without effective access either to financial advice or to long-term savings products.”
The fact that the Association of Independent Financial Advisors (AIFA) does not have a code of conduct is “deplored” by the MPs, and they call for one to be introduced and compliance enforced.
It notes that the Financial Services Authority (FSA) since their interception has made strides to improving the system and “the current low level of consumer confidence in long-term savings largely reflects the weak regulatory framework and industry practices prior to the arrival of the FSA.”
The MPs suggest that the FSA should launch a publicity campaign promoting its regulatory role, arguing that: “Greater public knowledge of the FSA’s role in protecting their interests would help restore confidence.”
