New ‘easy to understand’ financial products have been proposed by the Treasury as a way to encourage saving among Britons and restore faith in lenders.
The recommendation for a new brand of simplified savings products, outlined today in the Sergeant Review of Simple Financial Products, comes as part of an effort to improve trust between banks and consumers. Savers will understand exactly how their product works, and will not be confronted with variable charges or terms which cause confusion.
The initial products proposed include a simplified easy-access savings account, a simple-term life insurance product and a 30-day notice savings account.
If providers agree to the proposed changes, they will have to adhere to a standardised set of terms and conditions, meaning greater transparency not only between consumer and provider, but also between lenders. However, they may compete on price and service features, meaning savers will still have to compare simplified products across the market.
The ‘simplified’ features of these products are to include both a ban on introductory interest rates and other special offers for new savers, and a fixed savings rate offered to all, which will remain the same regardless of how long the account is used.
These suggestions are thought to have been encouraged by recent banking scandals and technical faults, which have led to a huge rise in customers switching accounts in recent weeks due to a loss of faith in the financial services industry.
Mark Hoban, financial secretary to the Treasury, said:
"The government is committed to putting the consumer back at the heart of the financial system, but we understand that restoring public trust in financial products is not an easy task at the moment."
"Simple financial products offer a unique opportunity to demonstrate that products can both be easy to understand and meet customers' most important financial needs."
A consultation with banks and other providers is due to take place over the coming months and, if an agreement is reached, the first financial products of this kind will be available from early next year.