The good news is that the Government is going to develop a "quality seal" for certain savings and investments qualifying to be held in an individual savings account (ISA). So-called CAT-marks (standing for fair charges, easy access, and fair terms) will appear on advertising for qualifying savings accounts, life insurance products, and stock market funds.
On savings accounts, for example, CAT-marks will be awarded when the provider guarantees the interest rates won't fall more than 2 per cent below bank interest rates.
If you are new to saving or investing, the CAT-marks offer you a guarantee of a fair deal - although it may not be the best on the market. The Government says its own research suggests many people don't save because they are worried about being ripped off. It hopes they will now feel confident enough to hand their cash over to someone else.
The scheme was pushed through by the previous economic secretary to the Treasury, Helen Liddell, and her successor Patricia Hewitt. They have pulled off a coup in the face of vitriolic opposition from some leading (overwhelmingly male) investment firms, which are hopping mad about CAT- marks.
The fund managers are furious because hardly any of their expensive unit and investment trusts will qualify for official approval. The rule is that stock market funds with a CAT-mark can only charge customers 1 per cent a year to manage their money. Most actively managed unit trusts charge 5 to 6 per cent up front, and then 1 to 2 per cent a year. Fund managers, however woeful their performance, are expensive people. Tracker funds, which by contrast are run by computer, are the only funds likely to qualify with ease. My guess is most of the big firms will nominate at least one of their managed funds to meet the magic 1 per cent annual charge. The resulting CAT-marked fund will be a loss-leader, but it will pull in the punters. The firms could then promote their more expensive funds to this massive new customer base.
Cynical maybe, but these are tough times for the poor old managers. How my heart bleeds.