UK simple financial products initiative takes next step

Following its initial consultation on the issue, in October 2011, the government created an independent steering group to continue work on the proposal. On Wednesday, that group published its final report, following consultation with a wide range of consumer groups and industry representatives.

The report recommends the first set of simple financial products to be developed should include: an easy access savings account; a 30-day notice savings account; a regular savings account; and a fixed term life insurance product. It says that a whole life insurance product should be the next product added, and the Association of British Insurers (ABI) will lead further work on a simple income replacement product. Credit unions will also be invited to develop their own line of simple products.

A badge to identify simple financial products will be created and awarded to qualifying products through an accreditation process. Qualifying products will carry this badge, the brand of the company, and a mark to clearly identify which products meet the simple financial products standards. The British Standards Institution (BSI) will set product standards, license the simple products brand, and monitor adherence to the standards.

All simple products will be required to comply with an agreed set of high-level principles, which cover product features, language, terms and conditions, pricing transparency, purchasing process, and regular information and product updates. The language used in simple financial products will be straightforward and consistent between products, and all key terms and conditions will be the same for each product, making them easy for people to understand and compare, it says.

The report also proposes the project’s next steps. To start, industry trade associations have committed to negotiating the specific arrangements with the BSI, and to continue work on broader simplification and standardisation of disclosure. The ABI will report back on its work on income replacement insurance in six months. And, the Treasury is to review its progress toward simple financial products in 12 months.

“We have known for a long time that being able to manage your finances effectively leads to increased well-being and a better quality of life, at every given level of income. I hope that the simple financial products initiative will make it easier for people to understand and compare the key financial products they need and make good choices with confidence,” said the steering group chair, Carol Sergeant.

“People need to be able to manage their everyday finances with confidence and ease. The products outlined in this report represent a milestone towards achieving this, and I am impressed with the way that such a diverse group of organisations has worked together to develop them,” said Sajid Javid, economic secretary to the treasury.

“The challenge now is to ensure that the work that has gone into the Sergeant Review is transformed into tangible changes for consumers, and I look forward to discussing progress made with the industry and consumer groups next year,” Javid added.