So, HM Treasury have now published the long awaited Proposed Product Specification for Sandler Stakeholder Products. I have been through the document and I cannot decide whether it is hilarious in its sheer misguidedness or completely depressing in its total naivety.
As we all know, in June 2001 the Government commissioned Ron Sandler to identify the competitive forces that drive the retail financial services and to suggest policy responses to ensure that consumers are well served, etc, etc, etc.
As a result, low-cost, lowrisk products, simple, single-charged products will be developed.
Of course, what this will achieve is “access to financial services for those on lower incomes”!
In addition, our caring Government wants to see a competitive and innovative market for retail financial services in which:
Consumers can easily identify the products and the help they require to meet their financial needs and, for those on low to medium incomes, be provided with better access.
One of the main target areas are households earning between £15,000 and £30,000 – who are quite unlikely to have any disposable income or be up to their eyes in debt already and the purchase of financial service products is the furthest thing from their minds – Stakeholder debt consolidation product required.
As well as many millions(15 million approximately.) of novice consumers who are considering entering the market and many millions(five-10 million approx) currently undersaving. Of course, all these people will be chomping at the bit to buy a stakeholder product. Why do I know that? I quote: “Give the FSA a statutory duty to promote consumer education.” Problem solved!
As usual, the consultation paper asks a range of questions for industry feedback. Yet the real issues that need to be raised and questions that must be asked have been completed avoided.
For instance, the Government ask the following question:
Q20: The Government welcomes views on alternative names for investment products with smoothed returns.
But they do not ask:
The Government welcomes views on how the FSA should promote consumer awareness.
The Government welcomes views regarding how the ethos of the targeted earnings' groups can be changed from a spending mentality to a savings mentality. We understand that it is the spend, spend, spend mentality that is currently propping up the economy but we are hoping they will, at least, spend some more money they don't have on stakeholder products.
The Government welcomes views regarding whether any product providers or IFAs are actually going to give a damn about the proposed new stakeholder products. In particular, we are interested in the views of product providers because we are only interested in preventing you from making any kind of profits whatsoever as we just want to see your solvency and free assets ratios reduce even further.
I know, I know. The Government “welcomes” views on the level and the structure of the proposed charge caps.
I believe that to be merely a gesture and a smokescreen to the fact that the charge caps will be set to suit the Government regardless of the impracticalities.
I suppose the banks will be the prime distributors of these stakeholder products as they will have greater access to the lower earnings' groups. I can see it now, during review meetings with their clients/savers, they will be able to sell them a pension at the same time as arranging a car loan or increasing their overdraft.
In summary, it is not unreasonable to say that Sandler, the Government, or anyone else who wants to get in on the act have completely missed the point. There needs to be an enormous cultural shift in the country. A a new range of products, no matter how simple, will simply not provide the answer in my belief.
Anyway, the next document I am looking forward to reading (which will probably happen) will be the Green Paper discussing the Pensions Reform Green Paper.
I love this industry!
Clifton Asset Management,