Savings industry

A powerful committee of MPs has recommended radical changes that need to be made in the long-term savings industry.

In a hard-hitting report released on Wednesday, the Commons Treasury select committee said the public had lost faith in pensions and other products.

Committee chairman John McFall said: "This committee has uncovered a catalogue of problems that have beset the long-term savings industry in recent years.

"These problems have their roots in a savings industry that has failed to adapt to the modern world and the new investment climate of steady growth, low inflation and low interest rates.

"The result...is that people now trust their local supermarket more than many of our largest life insurers."

Stakeholder Response: Association of British Insurers

Mary Francis, director general of the ABI, said: "The ABI and its member companies will look carefully at the report's recommendations. The report usefully brings together important issues for the industry, the regulator and its customers.

"As the committee recognises, we are already working closely with the FSA and other industry bodies on issues covered in the report, such as risk ratings and payment for financial advice.

"We also support the FSA's continuing work with the industry to help embed high standards of customer service throughout the retail banking, insurance and fund management sectors, summarised in the progress report published today. 

"We particularly welcome the proposed forum to bring all parties together to discuss the way forward on these important issues – a suggestion previously put forward by the industry."

Stakeholder Response: Consumers' Association

Mick McAteer, principal policy adviser at the Consumers' Association, said: "This is a significant report and is a damning indictment of the financial services industry.  Restoring confidence is one of the greatest challenges facing the government and Financial Services Authority (FSA).

"We agree whole-heartedly with the committees' view that the industry is not capable of solving the savings' crisis on its own.

"We welcome the committee's recommendations, which if implemented would represent a fundamental reform and restructure of the industry. The government and the FSA need to take this forward by drawing up a strategy to ensure that firms put the consumer at the heart of every decision from the boardroom to the sales floor.

"Currently much of the financial services industry is not focused on the consumer. The committee's recommendations on corporate governance, business practices and remuneration policies would help to align consumers' interests with the interests of firms.

"We are pleased that the committee's report has highlighted the plight of policyholders trapped in with-profits funds. Today we are reiterating our call to the government to open up an investigation which will set these prisoners free.

"We welcome the idea of a forum that provides a collective, forward looking agenda, and can draw up the plans for implementing these recommendations but this can only be successful if it is consumer led and consumer focused."

Stakeholder Response: Age Concern

Gordon Lishman, director general of Age Concern England, said: "Public confidence in long-term savings is extremely low. Many people do not have access to a pension at work, and distrust of pension schemes has lead to many choosing not to save. This is leaving many ordinary working people very unprepared for the drop in income they will experience on retirement.