80/98
18 May 1998
HELEN LIDDELL CHAMPIONS SAVERS
Economic Secretary Helen Liddell today invited financial services firms to help put customers first with a new class of savings which will be simple, clear and fair. She was launching a Treasury consultation paper Making Saving Easy. It suggests voluntary standards for individual savings accounts (ISAs) to give ordinary people a straightforward way of spotting deals worth having.
Stressing the importance of giving the public a fair deal, Mrs Liddell said:
"Today we are opening a debate about how financial firms can help their customers. People want everyday good value, and we want to help them find it without hassle. We want to put the customer first.
"That means working in partnership with the industry to develop a range of no nonsense savings which are simple, clear and fair. Savings like that will be easy for people to understand and so help them avoid making poor choices."
Making Saving Easy suggests voluntary standards which home in on three features: reasonable Cost, easy Access and decent Terms. These define the CAT standards, picking up the initials to remind people of what they are.
There will be three sets of CAT standards, one for each kind of ISA. That is, one for the cash (or deposit) ISA, one for the insurance ISA and one for the stocks and shares ISA. Once people have decided what kind of saving they want, they can have confidence that savings plans that meet the CAT standards should be a reasonable deal.
The CAT standard is not a kitemark. The Government is not giving certain products a seal of approval, still less a guarantee. What the CAT standards do offer is a simple way of judging whether savings offer decent value.
Mrs Liddell added:
"The great thing about the CAT standards is that they will take away the worry about the small print. Savers whose ISAs meet the CAT standard will not face nasty surprises or awkward catches. They can expect something very old fashioned yet very up to date - decent value.
"Best of all, the CAT standards should mean that there is more competition in the market for people with small amounts to put away. Too often they have to settle for poor value and limited choice. It is time ordinary savers were better looked after".
There will be no compulsion for every ISA to meet the CAT standards. ISAs that do not may be good value. But savers will generally want to make sure that they are getting something extra from savings which are not CAT standard.
It will be easy to tell whether a savings vehicle meets the CAT standard because its advertising will say whether it does or does not.
Notes to editors
Media copies of the consultation documents are available from the Treasury Press Office on 0207 270 5187.
Non-media copies are available from the Treasury Public Enquiry Unit on 0207 270 4558.
Responses to the consultation should be sent to : Janet Robbins H M Treasury Treasury Chambers Parliament St LONDON SW1P 3AG by 3 July.
In his Budget on 17 March, the Chancellor Gordon Brown announced details of the tax breaks which will be available to people who use individual savings accounts (ISAs). These accounts will be available from 6 April 1999.
CAT STANDARDS FOR ISAS - twenty questions
1. What is an ISA? An individual savings account - the new method of savings with tax breaks which starts next April.
2. What are CAT standards? Voluntary standards for reasonable charges, easy access and fair terms.
3. How does an ISA qualify for the CAT standard? Easy: just measure it up against the figures the Treasury will set. No need for anyone to test it.
4. How will I know if my savings account qualifies for the CAT standard? The advertising will have to say if it does.
5. If it's so easy to qualify, can I trust the advertising? Yes. If firms make false claims, the Financial Services Authority (the City watchdog) or one of the other regulators can stop them.
6. Is there just one CAT standard? No: three. One for each kind of ISA: cash, insurance and stocks and shares.
7. What do the CAT standards offer? A sensible no nonsense deal. It may not be the best in town, but it won't leave you kicking yourself.
8. So what's so good about the CAT standards? Any product that meets the CAT standard will be simple, clear and fair -including offering decent value. So ordinary savers can easily decide whether CAT standard savings are for them.
9. So is the CAT standard a guarantee? No. It's important that savers understand that. But the CAT standard should mean peace of mind that you won't get ripped off.
10. Will CAT standard products be suitable for everyone? Not necessarily. Savers should judge for themselves, or get advice, on whether any particular method of savings fits their circumstances.
11. Will CAT standards apply to all financial products? No, just to ISAs.
12. Can savers trust the CAT standards? That's what the consultation is designed to achieve. One of the proposed conditions for getting the CAT standard is that the saving product must stay at the CAT standard or better. Then people won't need to keep checking whether they are still getting a reasonable deal for their money.
13. Who will offer CAT standard savings? Any firm that wants to look after its customers and give them a square deal without pulling the wool over their eyes.
14. Will there be lots of CAT standard ISAs on offer? Remains to be seen. Bear in mind that the CAT standard package will be challenging though sustainable. The Treasury would like to see some competition among firms trying to beat the CAT standards.
15. Why is the Treasury doing this? Because there aren't enough savings on the market that are really simple, clear and fair. Too often it's hard to fathom whether what's on offer is worth having.
16. So will other ISAs be no good? Not at all. Hope that lots of ISAs will be attractive. But ISAs that aren't CAT standard may not appeal to ordinary savers with only Small amounts to put away.
17. What about firms that don't want to offer CAT standard ISAs? Their choice. But they'll be missing out on a great opportunity to really help their customers.
18. Can ISAs be mis-sold? Any financial product can be mis-sold if advisers go wrong. But it's hard to mis-sell something that is so simple, clear and fair that anyone can judge it for themselves.
19. Will people understand the CAT standards? That's one of the issues in the consultation paper. It will be important to make sure that savers really grasp what the CAT standards offer. The Treasury is looking for ideas to help ordinary people.
20. Will there be CAT standards for stakeholder pensions? You'll have to wait for DSS' green paper on pensions to see their proposals for stakeholder pensions. They are thinking of setting tough compulsory entry criteria for stakeholders - not quite the same as CAT standards.