William Kay: Teach our children what money will, or won't, buy

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The Independent Online

It will be intriguing to see who history decides will have had the greatest influence on Britain's personal finances, Ron Sandler or John Tiner. While Mr Tiner was finally and predictably unveiled this week as the new chief executive of the Financial Services Authority, the Government finally coughed up its response to Mr Sandler's blueprint for simplified medium- and long-term savings.

How it has taken 53 weeks for those finely honed brains at the Treasury to come up with their own version of Sandler's proposed products beggars belief. "Mutual fund" has been renamed "pooled investment product", "with profits" has become "investment product with smoothed investment returns" and pension has been updated as, well, pension.

There have been months of consultation, but even so you would think the Treasury could have produced this mouse of a manifesto a bit sooner.

As it is, the tricky issue of whether to impose a 1 per cent cap on selling commissions has been shelved while the FSA conducts so-called market research. This will amount to little more than asking the financial services industry if there is any chance it will swallow 1 per cent. Norwich Union has already said, "Not us", and others can be relied upon to follow suit.

So it is the height of optimism for the Treasury to state baldly that these stakeholder products "will go on sale in 2005". Not if no one is willing to manufacture them, they won't. And, even if this deadline is met, it will have taken all of five years from the time that the Myners Review said investment decision-making was being distorted by, among other things, the public's lack of understanding of the issues.

One of the Sandler report's answers was to create simplified savings products while the Government gets on with the vital long-term task of upgrading the state of financial knowledge and education. The report recommended that the FSA should be given increased financial resources to fulfil its obligation to improve education, ring-fenced to facilitate fund-raising for the industry. That call has fallen on deaf ears.

To his credit, the tireless Mr Sandler has put his money where his mouth is by becoming chairman of the Personal Finance Education Group, jointly if feebly funded by the City and Government. But financial education rated not a line in the Treasury's statement this week. Not a jot, tittle, comma or semi-colon.

So let us hope it is high on Mr Tiner's to-do list when he takes over as chief executive in September. As the present FSA director responsible for the consumer, he will be well aware of how much needs to be done, not least to overcome the scandalous degree of resistance to financial topics throughout the education sector, from teacher common-rooms to the highest levels of the Department for Education and Skills.

Mr Tiner, and his incoming chairman, Callum McCarthy, have the advantage that the FSA is accountable to the Treasury and therefore has access to the cheque-writing ability that is essential to get personal finance taught in every school as a subject in its own right, not merely an afterthought tacked on to citizenship or economics.

The Treasury has the power to allocate funds to the DfES, earmarked for this specific purpose. While the money in question would run into the millions, it would be a fleabite compared to the billions the Chancellor, Gordon Brown, is pouring into health, transport and the wider education scene.

And the payback would begin immediately. Every school-leaver goes into a job, training or university, all of which involve financial decisions. The ripple effect would soon spread to the youngsters' parents, and from there out to the high street.

When I asked a cross-section of the financial services industry this week what Mr Tiner's top priority should be, better financial education was easily the most popular suggestion.

Insurers and IFAs are no altruists: they are simply fed up with the amount of basic education they have to impart to customers, and their lawyers are frightened to death by the risk that those customers will later claim they didn't understand what they were signing for.

Those problems must start to be solved in the classroom, and Messrs Sandler and Tiner should join forces to knock on the door of 10 Downing Street and hammer home that message.

* Travelling abroad without insurance is a gamble too far. But the moneysupermarket website shows there are more than 1,100 insurance policies available, so the main choice is whether to go for single-trip cover or a year-long policy covering unlimited trips.

A one-off fortnight in Spain or Italy will cost £21.49 with 24Dr Travel, which will offer the same cover for a year, worldwide, for £69.64.

But look out for special deals. The Independent TravelSaver, linked to this newspaper, offers £5m medical cover and £2m personal liability worldwide for just £59.95.

The basic survival rules apply everywhere: ask for receipts for all but the most trivial spending, keep all those receipts until you arrive home, try to get witness details for any dispute, and, above all, keep your insurer and local police informed.

w.kay@independent.co.uk

William Kay is Personal Finance Editor of 'The Independent'

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