Call for simple financial products
Filed under: Savings & ISAs
The report said a kitemark badge should be introduced to help people identify the products and an independent body should be set up to ensure standards are being met.
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A simple easy-access savings account, a 30-day notice savings account and a simple-term life insurance product are the first three simplified products which should be developed, to increase competition and make it easier for people to shop around, the document said.
Your guide to banking
The report estimates that 15.5 million households or 29.4 million adults with incomes above £15,000 but below £50,000, at which point they are more likely to use a financial adviser, could benefit from simplified savings products. Some 9.7 million households or 19.8 million adults fall within the target market for simplified life cover, the report found.
The initial findings, which follow a consultation launched two years ago, come at a time when banks are trying to rebuild their reputations following a spate of incidents such as Barclays' Libor-fixing scandal and NatWest's two recent IT hitches. The widespread mis-selling of payment protection insurance (PPI) which is predicted to become the biggest consumer financial scandal of all time, has also dented customers' confidence. Lloyds Banking Group's PPI bill alone has soared to £4.3 billion, it was revealed last month.
Ms Sergeant said: "When consumers arrive at the financial marketplace there should be simple processes and products available to allow them to make an informed and straightforward decision."
The initial recommendations in the Sergeant Review of Simple Financial Products interim report will be open for further consultation, ahead of a final report in February 2013.
The group also wants to hear views on a simplified income replacement product for loss of income due to sickness, which could help 12.2 million households. The group wants to include this in the proposed range as soon as possible, it said, given the benefits to society of this being made available to consumers "safely".
The group said that each simplified product should meet people's basic needs "and no more". They should be easy to understand, compare and monitor, with no hidden surprises. They should be "non-advice" products which can be bought directly from providers, helping to make them affordable to customers and commercially viable. Each product should have the same terms and conditions and use the same language. Providers would compete on price, service and their own brand, making them easy to compare, the report said.
Most complained about financial products
- 1. No savings
- Current accounts
- Buildings insurance
- Consumer-credit products and services (i.e. store cards, payday loans, hire purchase)
- Unsecured loans
- Whole-of-life policies and savings endowments
- Other types of general insurance (i.e. mobile phone insurance, pet insurance)
- Motor insurance
- Credit cards
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