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&#39Advice essential to close savings gap&#39

Financial advice is essential if the £27bn savings gap between what people need to save and what they are currently saving is to be closed, says a report from the ABI and consultants Oliver Wyman and Company.

The report, called The Fut-ure Regulation of UK Savings and Investment, issued this week, says advice is necessary to encourage saving, especially among low to middle earners. It found that 46 per cent of households surveyed in the £9,500 to £13,500 income band say they would not have saved or invested had it not been for the advice they received.

The report says the costs of dealing with compliance make it prohibitively expensive for the industry to offer advice to low and middle earners. It says there are two key roles played by advisers – encouraging lower earners to save and optimising savings for higher earners.

The report calls for a new type of adviser, called a financial awareness representative, to primarily aid moderate earners. It says that, with reduced compliance and training burdens, there could be up to 6,400 FARs by 2005, which could result in 1.1 million new savers and £6bn more in savings.

Other changes identified in the report are lifting the price cap on stakeholder and Catmarked products to 1.5 per cent, making employers pay for advice for their staff with an annual financial healthcheck and compelling employers or emp-loyees to contribute to pensions.

ABI spokesman Malcolm Tarling says: “Independent advice has an important role to play in closing the savings gap. We don&#39t want to see it become more difficult to access bec-ause those who need it most won&#39t be able to get it.”

Aifa director general Paul Smee says: “It is an interesting idea. It needs more working out and I would be happy to join them to work it out. This is not a market model which excludes IFAs.”


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