No-frills accounts are on the way
Simple financial products that do what they say on the tin are to get a special seal of approval from the government so customers know they're not in for any nasty surprises.
The Sergeant Review of Simple Financial Products recommends the first products to be kite-marked will include an easy-access savings account, a 30-day notice savings account, a regular savings account and a fixed-term life insurance product. The review also suggests a whole of life insurance product should be included at a later date.
Products won't be able to include bonus or introductory interest rates and all customers – new and old – will get the same rates.
The British Bankers' Association, Building Societies Association and the Association of British Insurers have all agreed to bring about the changes.
Christine Farnish, chairperson for Consumer Focus, said: "Simple products are long overdue. They would, at long last, provide consumers with the option of no-frills, no-catch products that people can understand and buy with confidence.
"Because they would have some standard features designed to meet consumers' needs, it would be possible for consumers to shop around and compare similar products, thus aiding effective competition."
"Consumer Focus hopes and expects the financial services industry, encouraged by the Regulator, to get these products up and running."
The review's author, Carol Sergeant, a former chief risk officer at Lloyds Banking Group, said: "We have known for a long time that being able to manage your finances effectively leads to increased well-being and a better quality of life, at every given level of income.
"I hope that 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."
Generally thought of as being interchangeable with life assurance, but isn’t. Life insurance insures you for a specific period of time, at a premium fixed by your age, health and the amount the life is insured for. If you die while the policy is in force, the insurance company pays the claim. However, if you survive to the end of the term or cease paying the premiums, the policy is finished and has no remaining value whatsoever as it only has any value if you have a claim. For this reason, life insurance is much cheaper than life assurance (also called whole of life).
Association of British Insurers
Established in 1985, the ABI is the trade body for UK insurance companies. It has more than 400 member companies that provide around 90% of domestic insurance services sold in the UK. The ABI speaks out on issues of common interest and acts as an advocate for high standards of customer service in the insurance industry. The ABI is funded by the subscriptions of member companies.