FSA delays savings report

THE UK's chief financial watchdog said today its report on low-cost savings products would be delayed two months to May or June, further postponing a key decision on whether to raise the 1% price cap on the products.

The Treasury has said it will wait until the Financial Services Authority has completed the research before it decides whether to raise the ceiling.

The FSA said difficulties around the Christmas holidays in getting enough financial advisers to participate in its research into the marketing of the low-cost savings vehicles would hold up publication.

A decision to raise the price cap would give a sharp boost to life insurers, which have positioned themselves to provide the products but argue that they are not viable to market, sell and manage if charges are held at 1%.

The Government believes a cap on what insurance groups can charge for managing the products is essential to make them affordable to the less well-off.

A review of the UK savings market in 2002 by Ron Sandler, the former head of Lloyd's of London, recommended mass-market savings products as a way of encouraging people to save.

The so-called Sandler products are designed to be equity-based and simple to understand and sell. The FSA's research focuses on whether the products can be marketed and sold with little or no advice.

The potential of so-called stakeholder pensions, introduced by the government more than two years ago to encourage low-to-moderate earners to save for retirement, has not been fully realised because the 1% cap made insurers reluctant to offer them.

Ron Sandler will appear before the House of Commons Treasury Select Committee on Thursday to answer questions on Britain's beleaguered long-term savings industry.

Insurers including Aviva, Prudential, and Legal & General argue that however simple the new Sandler products are, some form of advice to customers will still be necessary, minimizing the amount of savings insurers can make on selling costs.