View more on these topics

Inept Government has discouraged people from saving

Open letter to Eric Forth, MP

Thank you for your letter dated April 22 enclosing a reply to some of the items raised in my letter to Baroness Hollis, for which many thanks.

In Ms Ruth Kelly&#39s reply, she states that the intention of the Government was to ensure that tax relief was distributed as fairly as possible and closely targeted those without substantial savings.

It is, therefore, difficult to understand how this objective was met by the launch of investment vehicles that gave the most significant tax relief to the better-off.

Even now, with the reduction in the tax credit – which, incidentally, does significant damage to retired clients in receipt of investment income – the capital-gainstax-free status can only be of benefit to the more substantial saver. This is self-evident.

Isas have been characterised by endless complication (the insurance element, for example) and are hopelessly difficult for most clients to understand. This is especially so in relation to the mutual exclusivity between cash deposit investment and equity-based investments. How can the ownership of a non-regulated product (cash Isa) prohibit the ownership of a regulated product (maxi Isa)? No doubt the minister can recite the maxi Isa and mini cash Isa rules by heart – but has she ever tried to explain them to an investor? Would the investor understand?

For the minister&#39s information, the Personal Investment Authority severely criticised Prudential in 1994 for encouraging holders of matured Tessas to invest in Peps. Prudential&#39s line was: “You&#39ve met Tessa, now meet Prudence.” All very clever but the PIA was not amused.

The basis of the criticism was that a cash investor was a cash investor and an equity investor was an equity investor and never the two shall meet. But the Government has institutionalised the very confusion that the PIA identified as being of detriment to the consumer.

By giving the same name to both an equity investment and a cash investment, the Government has been inept. At best, it demonstrates a lack of understanding of the field. At worst, it demonstrates an attempt by Labour (which was never really “New”) to overturn the success of Peps and Tessas to the detriment of the consumer. Champagne socialists really do view working people with contempt.

The only conclusion that one can come to after seeing such ineptitude is that the objective never was to increase savings but, rather, decrease them. This fact is demonstrated in the official records, which show that the savings ratio has collapsed under the Labour administration.

The only possible other explanation, and this is given credence by something Home Secretary David Blunkett said a few days ago in another context (immigration), is that the desire was simply to manage what people thought.

The fact that it may backfire, cause confusion, conflict with previous regulatory decisions, lose the momentum towards successful savings strategies and cause millions to be dependent on state benefits in retirement was not even considered.

The objective was to make people think that the Government was helping them. After so many years of spin and opinion management, this latter explanation, perhaps, emerges as the most plausible.

So what of stakeholder? Surely the Government recognised that a product could not be distributed below cost? Let us examine the Government&#39s track record:

•The launch of a study by B&W Deloitte to try to determine the appropriate charging level for investment products years after imposing a 1 per cent charge cap.

•Total faith in the design of investment products by one with absolutely no relevant experience.

•It is still working on a “streamlined” sales process (and still not sure what this means) years after streamlining the charges.

The whole thing has been strung out over years. Each new “initiative” is an opportunity for the Government to claim a headline. Each new twist and turn is an historic victory in the Government&#39s fight to protect the consumer. What tosh!

The whole saga boils down to one of the greatest examples of Government incompetence imaginable. The consumer(as ever) is the real loser.

They say a people get the Government they deserve. What on Earth did we do to deserve this?

I would be grateful if you would pass this letter to Ms Kelly for her comments.

John Morris

Managing director,

The Harvest Partnership

Bromley, Kent


Stakeholder slumps as focus shifts

The number of people taking out stakeholder pensions fell by 22 per cent to 58,000 in the first quarter of the year from 74,000 in the first quarter of 2003, according to ABI figures. Stakeholder premiums fell by 8 per cent from £131m to £120m but total new individual regular-premium pension sales rose by 3 […]


“No, they should be better at doing what they do anyway.”Michael Jones,Michael Jones Independent Financial Services “No I really don&#39t think they should charge any more.I pay for the service already through my network.”George Love Financial Services,George Love “Absolutely not. IFAs are under pressure from all areas with regard to fees and charges and we […]

Former YRA management set to buy firm

Surrey IFA Young Ridgway & Associates is expected to be bought out within days by its former management after going into receivership on the advice of the FSA. The firm, which has 20 RIs, went into receivership last week after the FSA expressed concerns – refuted by YRA – that it could not meet potential […]

Savings on bond transfers

The personal investment and pension markets are now more difficult places in which to be an adviser. However, it is important that you do not forget the enormous opportunities that still exist for your clients. Some of your clients, who have existing single-premium insurance bonds, will be dissatisfied with the opportunities for future returns offered […]


News and expert analysis straight to your inbox

Sign up


    Leave a comment


    Why register with Money Marketing ?

    Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

    News & analysis delivered directly to your inbox
    Register today to receive our range of news alerts including daily and weekly briefings

    Money Marketing Events
    Be the first to hear about our industry leading conferences, awards, roundtables and more.

    Research and insight
    Take part in and see the results of Money Marketing's flagship investigations into industry trends.

    Have your say
    Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

    Register now

    Having problems?

    Contact us on +44 (0)20 7292 3712

    Lines are open Monday to Friday 9:00am -5.00pm