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Suite cap would be sour for savings

Ron Sandler&#39s embrace of price-capping on a grand scale is deeply disappointing and deeply hazardous for IFAs although much depends on the FSA.

Providers are expressing serious concerns about whether the FSA could do a stakeholder-style RU64 ruling on the planned price-capped suite of products. Even without this, a new 1 per cent regime could prove infectious.

Money Marketing believes price-capping is wrong in principle. It smacks of a half-baked nationalisation, such is the degree of interference required. It may – just – have been acceptable for personal pensions following the excesses of the 1980s but not for other savings.

It is the practicalities that are of most concern. It is very difficult to set up a parallel universe of products to sit alongside existing distribution. We can see problems enough with simplified advisers, let alone no-advice products which may not sell or could be misbought.

The fear for IFAs is that the FSA extends its no-material-disadvantage ruling, forcing them further into a 1 per cent straitjacket.It would mean more damage to existing distribution and aggravate the blight on savings.

Of course, Sandler taken to its logical conclusion undermines many of the principles of the FSA too. Draconian product regulation for the lower and middle market surely means the higher end can rely on the courts and caveat emptor, so whither the FSA? But we must defend its role. Simplification should happen only within the FSA&#39s terms of reference and should extend across all distribution channels. Catmarked products may be inevitable but 1 per cent products sold outside the existing regulatory protections should be ditched now.

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