The country's leading savings companies yesterday unanimously came out to warn that the individual savings account designed to replace Peps will not work for low-income savers.
They warned that regulation of the product has been so poorly thought- out that supermarket till staff would be faced with the same daunting responsibilities as qualified financial advisers.
The proposals are designed to give savers a low-cost, tax-efficient account which can hold up to pounds 1,000 in cash, pounds 1,000 in life insurance or pounds 5,000 in collective investments such as unit trusts. Initially, objections focused on the proposed lifetime limit of pounds 50,000 on contributions to the account. But the savings industry has become increasingly frightened that low-income savers will be left unprotected.
Directors of the companies said the complexity of the product was totally incompatible with unregulated selling through outlets such as Tesco. They warned that the proposals meant it would be sold by unqualified personnel with no protection against a bad sale.
A Treasury spokeswoman said she was unable to comment before 31 January, when consultation is due to end.
David Mossop, chief executive of Perpetual, the UK's largest Pep provider, said: "Is someone who is 16, on the cash till at Sainsbury's, going to be trained to the same level of competence as a professional adviser? Is the girl going to say, `Invest pounds 5,000 in equities with us and we'll give you half price on your Christmas turkey?' The idea that this thing can be sold effectively with proper consumer protection is pie in the sky."
Currently, life insurance and unit trusts are sold under strict rules which insist customers must be given best advice by qualified sales people, while cash deposits are more lightly regulated. The Government proposes to create a hybrid product with one foot in each regime.
The industry fears that savers could be encouraged to put money on deposit at a supermarket or elsewhere, only to find they had barred themselves from investing more than pounds 1,000 - or from putting their money in other investments with better returns. Further, the complexity of the product will sharply increase costs.
Tom King, group director of Standard Life, the country's largest mutual life insurer, said: "You could make a decision at a supermarket that will affect your ability to invest elsewhere in the long-term, when good advice would be to discuss other investments. The Government wants a low-cost product to which the public will have easy access - and this isn't it."