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Complications of a simple plan

Fans of incremental change should pack their bags – the revolution may hardly have started.

This week gave us insight into Ron Sandler&#39s review. According to one Sunday newspaper, the head of the Treasury savings review believes regulation has stood in the way of people buying simple investment products, literally off the supermarket shelf.

The review could bring another round of simplification, perhaps complemented by the Pickering review of pensions which seems to involve yet another rewrite of the tax rules in coordination with the Inland Revenue.

Many in the industry will agree with the need for simplification. But we would urge the reviewers not to throw out all the old regulations in the cause of getting people to save. There is no point simplifying to the point where more regulation is then required to put right what goes wrong subsequently. Protecting consumers while keeping down costs is a balancing act. Regulating products only works firstly where there is an incentive to sell them and to buy them and where it doesn&#39t leave one or two providers with a stranglehold. That simply shuts down competition.

Finally, simplification should not be used to defraud the public by getting them to save without advice in a bid to bail out the welfare system. It is not their fault for not saving if it is not worth their while. It is the fault of those who created the disincentives in the first place. As advisers are aware, investor education for some income groups may mean telling people not to save. Is the FSA&#39s consumer education programme up to the task and will the assorted reviewers grasp that particular nettle? Somehow we doubt it.

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