Sandler report calls for simplified products to end savings rip-off

Savings Review: Ban on commissions for fee-hungry financial advisers *Charges to be capped

Private investors could have access to a raft of new simple and cheap pensions and savings products under proposals published yesterday by a Government-sponsored review into the financial services industry.

Ron Sandler, the former chief operating officer of NatWest Bank appointed to conduct the review, has urged the Government to adopt his vision of creating a range of products that are so straight-forward people could even buy them from their supermarket.

This would by-pass current rules which require would-be investors to seek financial advice or, at the very least, to go through lengthy questionnaires to make sure a product is right for them.

Mr Sandler's suggested "safe haven" products, which could include pensions and investments such as unit trusts, would have capped charges and no hidden penalties.

The recommendation comes after Mr Sandler found in his 12-month review of the pensions and savings industry evidence that it is so complex that most people do not have even a basic understanding of financial matters.

"Consumers are reluctant to engage with the industry because they don't understand or trust it and competitive forces are not delivering value for money," he said.

Mr Sandler believes companies have not done enough to make their offerings transparent and simple, especially in the with-profits arena, making it difficult for consumers to identify the best and worst in the market.

The lack of transparency, Mr Sandler argued, has also led to many investors with modest means putting money into funds managed actively by individuals when in many cases they would be better in low-cost passive funds which track an index such as the FTSE 100.

As well as introducing a new range of safe and simple products, which he gave a working title of "stakeholder" products after the low-cost pension of that name, Mr Sandler is also calling for a shake- up of the tax regime. Tax breaks on pensions should stay, he says, but the rules should be simplified so consumers can compare different types of savings and investments.

To complete the programme of change, Mr Sandler wants to tighten rules on financial advice for those who still want to go to an adviser to buy a product not in the new "stakeholder" category. He proposes that "independent advisers" be banned from receiving commission from companies, which is often hidden in the sales process.

Mr Sandler's ideas were welcomed by the Treasury, which set up the review last June. Ruth Kelly, economic secretary to the Treasury, said: "This report sets out a vision of a simpler, more transparent and more competitive long-term savings industry."

It is likely the Government will take many of the recommendations on board because it is desperate to find ways to boost the amount of money people are saving because the current working generation is on average putting away £27bn less than it should for old age.

It is a particularly tall order at the moment, as two years of falling stock markets, millions of endowment policies not paying off people's mortgages and crises in the life assurance sector have combined to hit public confidence further.

Consumer bodies also threw their weight behind Mr Sandler's call for reform. Sheila McKechnie, director of the Consumers' Association, said: "This has correctly diagnosed the fundamental failings of the financial services industry. It shows that sole reliance on the market to deliver competition does not work."

The Financial Services Authority and the Association of British Insurers gave the report a more cautious welcome.