Consumers in the financial marketplace should be able to follow simple processes and find products that allow them to make an informed and straightforward decision about purchase, according to the Sergeant Review of Simple Financial Products interim report, published today.
And the Treasury is recommending a radical overhaul of financial products, with accounts meeting its standard getting a “kitemark” of approval, which could help to restore trust in the industry, badly dented by recent scandals.
The Sergeant Review was led my MP Mark Hoban, financial secretary to the Treasury, who said that the complexity and choice in the market led to a “barrier’ to consumers taking control of their finances.
But he denied that the review would be too simplistic, saying: “This is not just for the financially illiterate but also for Middle England.”
Author of the Review, Carol Sergeant 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.
According to the Review, 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.
Under the review, the first products in line for simplification are Easy Access Savings Accounts, 30-Day Notice Savings Accounts and Life Cover. The new savings products will not offer bonus or introductory interest rates and all savers will be paid the same rate, regardless of the length of time they hold the product.
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 initial recommendations in the Sergeant interim report will be open for further consultation until October, ahead of a final report in February next year.
Steve Horton is a Chartered Accountant and a Chartered Financial Planner who specialises in helping clients to manage their pensions and investments