PROPOSALS FOR AN EXTENDED RANGE OF “STAKEHOLDER” INVESTMENT PRODUCTS PUBLISHED

The Government today outlined its proposals for an extended range of simple, low cost investment products in their consultation document, Proposed Product Specifications for Sandler ‘Stakeholder’ Products.

These products, as recommended in the Sandler review of July 2002, are aimed at increasing competition in the financial service industry and at making medium and long term savings more accessible to lower income customers.

Key features of all the products will be:

Simplicity- the products will have strict limits on their features in order to ensure that they are easy to understand.
Risk controlled- each of the products will have investment restrictions in order to limit the potential loss to the consumer.
Low cost- the products will be charge-capped in order to ensure that they are good value for money.

Ruth Kelly, Financial Secretary to the Treasury, said:

“These products will be simple, low cost and risk controlled. They are aimed at the millions of people who find financial services and products confusing. People who have the ability to save but aren’t currently doing so. Consumers who are not attracted to, or best served by complicated products.

“In order to be successful in getting lower income people to save more for their future the product specifications must be right. This consultation provides the opportunity for everybody to put forward their views and I look forward to receiving responses from a wide range of people.”

Pensions Minister Ian McCartney said:

“People need to have more confidence about saving, particularly for their retirement. Stakeholder pensions have shown how we can build confidence in new products. Stakeholder pensions are good value for money, flexible and secure and easy to understand.

“We want to build on that approach. A suite of simple, price-controlled and regulated products will enable many more people to save for the kind of retirement they want.”

The consultation will last three months. The Government will propose final specifications for the products in the summer.

Notes for Editors

1. In June 2001, the Government commissioned Ron Sandler to identify the competitive forces that drive the retail financial service industry and to suggest policy responses to ensure that consumers are well served. His review, Medium and Long-Term Retail Savings in the UK, was published in July 2002 and is available on this website.

2. The review found that the industry suffered from complexity and opacity, from problems of access for those on low to medium incomes, and from the inability of consumers to drive the market effectively.

3. One of the review’s principal recommendations to tackle these problems was for the Government to develop specifications for a suite of simple, price-controlled, and risk-controlled products that would help drive competition in the industry and would improve access to financial services for those on lower incomes. This “stakeholder” suite would include, but not necessarily be limited to, a unitised product, a with-profits product and a pension product.

4. The features of the products would help the Financial Services Authority (FSA) to create a simpler sales regime for such products. This would result in a shift in the focus of regulation from the sales process to the products themselves, and thereby reduce the cost of selling the products.

5. This document sets out options for the specification of these products, along with a discussion of whether other products should be added to the suite. The Government welcomes comments on these proposals. They should be read in parallel with the FSA Discussion Paper 19 “Options for regulating the sale of ‘simplified investment products’ ” which considers the broad options for regulating the sales regime for these products.

6. Media enquires should be directed to Treasury press office, tel. 020 7270 4420 or DWP press office, tel. 020 7238 0751.

Press Notices index 2003 January to June