Action to end savers rip-off
The savings industry faces a huge shake-up today after an inquiry showed millions of people are being ripped off.
A report commissioned by Chancellor Gordon Brown promises war on the "cowboy sellers" - the so-called independent financial advisers who make big profits pushing unsuitable products to savers.
There will also be easier to understand policies on financial products and simpler rules on taxation.
The report from former Lloyd's of London chief Ron Sandler says that high charges on savings products and their unnecessary complexity are stopping many people, particularly the less well-off, from putting enough money aside for their old age.
There are clear "grounds for concern" over the way Britain's £340billion savings industry works, says Mr Sandler.
The publication of the review, which follows scandals such as the Equitable Life disaster and endowment misselling, is expected to lead to the biggest reorganisation of the financial services industry for a decade.
Mr Sandler said: "It is of fundamental and growing public importance that Britain should have a savings industry that is both efficient and widely trusted.
"The long-term welfare of millions of of people depends on it, as does the effective operation of our capital markets."
The review highlights two main problems: a failure of competition in the industry "to deliver cost efficiency or value for money investment practices" and levels of savings among the less well off that are too low for them to be able to provide for their retirement.
The report makes a range of recommendations, many of which are likely to be implemented by the Government. They include:
? The introduction of a new range of simple, easy to understand products with capped charges that savers can get out of without crippling penalty payments. These could be sold without the need for expensive advice. The report condemns the current "vast array of subtly differentiated products and complex charging structures".
? A clearer structure for so called "with profits" products, which are poorly understood by most savers and hard to compare.
This would involve more information on their performance, the removal of unnecessary jargon and more effective competition,
? An overhaul of financial advisers so that only those who are genuinely independent and not paid by the financial services industry can claim that status. Savers currently have "no understanding of the costs of advice and are unable to gauge its quality," the report says.
? Tougher qualification standards for financial advisers.
? Simpler taxation of savings products. The report says that "over time the tax system for retail savings products has become very complex."
? A beefed up campaign of consumer education so that savers find it easier to understand the savings products they are being sold. The review was welcomed by the financial services industry. The Association of British Insurers said: "We believe the savings gap is the number one financial issue facing the country. We believe more government incentives are needed to encourage people to save."
The Sandler report will be followed on Thursday by a review of the pension industry conducted by Alan Pickering, former chairman of the National Association of Pension Funds.
The Pickering report is expected to recommend a major overhaul of the pension industry.
