From endowments to Equitable, Britons ask if it's worth saving up

"We were shown a list of the best-performing endowment companies and right at the top of the table was Standard Life," remembers Lesley Amer.

"We were shown a list of the best-performing endowment companies and right at the top of the table was Standard Life," remembers Lesley Amer.

The year was 1987, when her faith in the UK's financial services industry - and that of millions of others - was much stronger than it is today. Now Mrs Amer expects her endowment to fall short of its target by some £10,000.

In a bid to cover this potential shortfall, she and her husband, Leigh, are remortgaging their home. "We were advised that an endowment was the best way forward and so the projected shortfall letter from Standard Life left us horrified," she says.

Mrs Amer is just one of an estimated seven million savers ruing their decision to buy an endowment, according to a report published last week by the Treasury Select Committee. This reveals an average shortfall of £5,500 for each policyholder, producing a total black hole of about £40bn.

To make matters worse, the endowment crisis is just the latest in a long line of disasters that threatens to destroy consumer confidence in long-term savings. The Select Committee report refers to "damaged public trust" and warns that "many large retailers now have a higher level of trust than some of the UK's largest financial institutions".

The pensions mis-selling scandal of the 1990s, followed by a series of crises including Equitable Life (page 25), split-capital investment trusts, mortgage endowments and precipice bonds have eaten away at consumer trust.

"There is no one step which will restore confidence in the financial services industry," says Ron Sandler, the architect of a proposed suite of simple long-term savings products and chairman of the Personal Finance Education Group. "It is a major task. But like it or not, consumers have financial needs which require that they engage with the industry, and that is inescapable."

Mixed messages from the Government are making matters worse. On one hand, it tells us we are not saving enough, yet on the other, the Treasury plans to cut back on incentives to do so by slashing allowances on individual savings accounts from April 2006. And the failure of the Pensions Bill to encourage people to save for their retirement is short-sighted.

The Treasury's report also concludes that the way companies earn their money is at the heart of mis-selling scandals. It lambasts the system of commission paid to salesmen, which "rewards potentially inappropriate and short-term sales practices and pays no heed to the investment performance of the product".

Critics argue that a similar conflict afflicts the Financial Services Authority, in that its job is to protect consumers at the same time as safeguarding confidence in the markets. The Consumers' Association deplores the regulator's structure as "not fit for the purpose".