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FSA says £110m key facts are vital for consumers

The FSA admits that its proposals for a new disclosure regime will be an expensive burden on the industry but says it is a necessary move to ensure that consumers understand the products they are buying.

As revealed in Money Marketing in January, the proposals could cost the industry £110m although the regulator says it is planning a phased introduction to minimise the impact.

The proposals, outlined in CP170, Informing Consumers: Product Disclosure at the Point of Sale, will see key disclosure documents replaced by key facts.

Consumers will be given the new document, which will focus regulatory warnings with limited branding warnings, early in the sales process. It hopes the key facts brand becomes recognisable to consumers so they realise that the documents are different from promotional material.

Separate documents will be developed for life and pension and investment products, mainly because the latest EU amendments to the Ucits directive will force fund firms to include a reference to past performance for the first time.

This is despite the fact that the FSA has said in the past, and continues to maintain, that past performance is not a valuable guide to the future.

The FSA said in its draft document that the plans could cost £140m but estimated that the figure in practice could be around £100m for life offices and £10m for fund firms.

It says the cost will be justified if, over the next 10 years, 36,000 unsuitable sales are avoided – 0.6 per cent of the six million products bought each year. The FSA says it is difficult to gauge the effectiveness of the disclosure regime but that it is clear from its research that consumers do not read key features documents.

NU head of media relations James Evans says: “Any chan-ges for consumers must add real benefit and should be considered against the potential costs involved, which may be prohibitive.”

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