Jargon-free accounts can simplify savings

Finance firms told to cut complexity in savings and insurance

Misleading temporary bonus savings rates should be banned, the Treasury has recommended. In a review of savings and insurance products published this week it also called for kitemarking on approved products that meet certain principles.

The products must use straightforward language, terms and conditions, have pricing transparency and provide regular information and product updates. The first products proposed to be kitemarked are an easy access savings account, a 30-day notice savings account, a regular savings account and a life insurance product.

The review was chaired by Carol Sergeant, formerly of the Bank of England and Financial Services Authority. She said: "The simple financial products initiative will make it easier for people to understand and compare the key financial products they need and make good choices with confidence."

Which? executive director Richard Lloyd welcomed the move. "Consumers should not have to tackle pages of terms and conditions and they should be told clearly what rates and charges apply, so they can shop around more easily and get a fair deal."

Caroline Rookes of the Money Advice Service said: "I'm all in favour of simplicity. The more people understand savings products, the more likely they are to save and be prepared for life's ups and downs.

But some commentators were not impressed by the proposals. "We've been here before," pointed out Annie Shaw of CashQuestions.com. She's right. There were CAT standard financial products (which stood for fair Charges, easy Access and decent Terms) and the doomed "Sandler suite" of simple products devised by the former NatWest executive Ron Sandler, who notoriously included untransparent and discredited with-profits policies among his recommendations.

"Experience tells us that simple accounts necessarily have uncompetitive rates to make it cost-effective for providers to market them," Ms Shaw warns. "Consumers unsurprisingly shunned CAT standard products in their droves in favour of accounts with more appealing headline rates."

One of the biggest drawbacks was that providers were not allowed to indicate that CAT products were always suitable for savers; that their performance was guaranteed; or that CAT standard products were in some way government-approved.

"Unless Sergeant products overcome this hurdle her recommendations will no doubt join Sandler and CAT schemes in the dustbin of history," Ms Shaw says.