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Treasury group may shift focus to create simple investments

by Michelle Abrego on Nov 19, 2012 at 10:54

Treasury group may shift focus to create simple investments

The Treasury’s independent steering group on simple financial products could shift its focus to creating simple investment products.

The group, set up by the Treasury in October 2011 and headed by former Lloyds chief risk officer Carol Sergeant, has so far worked on simple savings and insurance products.

Peter Williams, who leads a group working on the delivery of simplified advice commissioned by the financial services Gleneagles conference, said Sergeant was looking to build on that focus by examining investment products.

‘[They’ve done the] cheap, cheerful and non-advised products, and the next question is whether you can design an investment product that meets that criteria,’ he said.

Williams (pictured) said it was challenging to design a product that had a guarantee but remained simple.

‘It’s difficult to make [investment products] that are completely foolproof,’ he said.

‘You’d have to bring in some form of guarantee, which would bring in complexity. And consumers would have to [be able to buy it] unaided, and that’s something Sergeant’s group is going to have to work on.’

A spokesman from the Treasury said: ‘In the future, the steering group could take forward the simple products work and decide to investigate the scope for simple investment products.’

16 comments so far. Why not have your say?

Charles Rickards

Nov 19, 2012 at 11:18

Didn't they used to be called With Profits endowments?

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Arthur Schopenhauer

Nov 19, 2012 at 11:21

What ever happened to a free market when will these clowns stop interfering where all they display is ignorance

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Nov 19, 2012 at 11:37

So lets design a simple product with guarantees, that is accessable, but invested in the market. Sounds easy, so lets get a committee to design it. We will have a leader who is so good at risk, she used to work in Lloyds (who took on so much risk they had to have huge government bail outs) and the Treasury will have a significant input. (There latest staff survey states 73% of staff want to leave within the next three years)

Many investment houses have tried to provide this type of product, the nearest being the guaranteed structured product, but hey ho, not as guaranteed as they think.

Maybe they think the market will guarantee losses for a tiny fee?

Strikes me that they should not get involved, otherwise if a proposed investment fails, either the government will have to cough up, or be sued for billions.

How many on this steering group remember the fiasco of Stakeholder pensions, how a simple product with lowish fees was supposed to provide the answer to the pensions and savings gap. Did it work? Did it hell!

Mind you, the steering group could co-opt Lord Turner to help them with the product design, his track record is unmatched!

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Insiders Comment

Nov 19, 2012 at 11:39

Arthur - didnt you know its called jobs for the boys - aided by an inept government who are eith too supid to understand what is going on or alternatively have a hidden agenda. The second choice assumes taht nobody can be this stupid!

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Julian Stevens

Nov 19, 2012 at 11:54

WP Endowments were never simple, Charles. Even now, after the imposition by the FSA of a raft of measures to make WP funds more transparent (a buzz word that I personally hate), they aren't. Having, like many people, decidedly gone off WP as an investment medium in recent years, I've found that WP Bonds from which regular income withdrawals have been taken for many years seem to have maintained their capital values remarkably well and even delivered some capital growth as well. Such results are totally at odds with today's decidedly low horsepower reversionary bonus rates and can only be ascribed to Terminal Bonus awards on income withdrawals. But providers never seem to report on their TB awards on regular withdrawals so, despite the best/worst efforts of the FSA, it's still almost impossible to see what's going on under the bonnet.

That aside, the only way to create simple investment products is to simplify the governing tax regimes. Investment funds can never be simple. Cash on deposit isn't money invested, it's just money parked. Also, deposit taking institutions are still not required to disclose the difference between what they earn on your money and what they pay you in interest, so cash deposit products aren't transparent either.

100% tax free ISA's would be a step in the right direction, leaving the intermediary only to explain:-

1. what Unit Trust/OEIC's are,

2. the different types of Unit Trusts and OEIC's available (why are non-Cash ISA's commonly referred to as Stocks & Shares ISA's?)

3. How and why their values go up and down from time to time and

4. the associated charges.

Trying to create simple investment products is a bit like trying to create a simple aeroplane. I don't believe it can be done and trying to do so is just a waste of time and money.

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Nov 19, 2012 at 12:19

Let us remember it is the Treasury that interfered with Income Draw down pensions and look what a huge mess they made of that. Too many Eton and Harrow old boys hiding in the Treasury. ( Jobs for the boys)Time to flush them out and replace them with people that have a better grasp of what needs doing to return this country to prosperity.

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Nov 19, 2012 at 12:20

Here we go again, I wonder if the government also wishes to invent easy self-surgery kits, easy do it yourself MOT, easy do it yourself electrical installation and do it yourself driving lessons.

Why do these people believe a person that headed Lloyds risk can suddenly create an investment with no risk, guarantees and easy to understand. The high street banks clearly have done such a fantastic job in the past, their experties and track record will mean you cannot fail.

This is very simple really, if you want a safe return, put the money on a deposit account. There, I just saved the industry millions, payment please to me ASAP, I don’t want much say £45K pa for 12 hours work a month to come up with lots of ideas that have already been tried and failed.

Never mind, more work for us to sort out the train crash in the years to come. Stakeholder worked a treat, NEST will be a laugh (how many advisers, how many employers?) and nothing will change.

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I'm an IFA - get me out of here

Nov 19, 2012 at 12:24

What about people going door to door offering these simple products that the mass market could buy.

Oh, hang on we use to have that, before regulation killed it.

I am only kidding of course those days were terrible. People were mis sold, so much so, that when one policy matured, they were stupid enough to buy another.

I think I'd better think it out again.

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Nov 19, 2012 at 12:33

@ Julian

Charles has a point, WP plans were seemingly simple for the customer to understand. All they understood was that their investment was guaranteed, and the interest (bonus) was variable, in line with investment markets.

True, when looking at early policies, however the insurance companies then started to write a lot of small print on later plans, including terminal and annual bonuses, Market Value Reduction and so on. They then made their costs and fees almost impossable to fathom, and the eventual pigs ear of a plan made the insurance company liable for nothing, therefore was little different to a managed fund.

Naturally, all this small print resulted in all the benefits for the company and most risk being borne by the purchaser. However, no one seemed to tell the salesmen, so a lot of investors were told a different promise.

But the original structure has merit, but what company would provide a no loss, no early surrender fee (RDR remember) low cost and low minimum investment plan?

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Charles Rickards

Nov 19, 2012 at 12:52

The big problem is that with out education, consumers will not just buy the products they may need to protect themselves and families for the issues that may cause them to lose income or to build up funds for later in life.

The IB salesmen and women of the past enabled a larger proportion of the population to have more than the would otherwise have done. Their products may not have been the best, but they were a lot better than nothing at all. The current hysteria about best outcomes and transparency has caused many to be in a worse position thann they might otherwise have been put in.

An Endowment provided savings and life cover, the very two things that most consumers could do with more of. Until such time as it is economically viable to provide such plans at an affordable level, nothing will change.

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Philip Wise

Nov 19, 2012 at 12:56

There's a fundamental question of simplicity or choice; you cant have both.

So, scrap some unnecessary complications - e.g. get rid of (tax free) cash on pensions, take away one of annuities or drawdown, and only allow one type of annuity (eg. monthly, single life, increasing by RPI).

That would make for simple products. Adding more products, whether they are called simple or not, just makes things more complicated.

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I'm an IFA - get me out of here

Nov 19, 2012 at 13:04


I tend to agree with your comments. its all about consumer outcomes and yet as a result of the loss of IB many consumers no longer have savings or life cover.

I would have though that is a pretty bad outcome. Who is to blame for that?

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Arthur Schopenhauer

Nov 19, 2012 at 13:06

@ Philip Wise I think you have invented a retirement annuity contract

Lets include this in pension simplification Mkll in the 2013 Pensions Act

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Julian Stevens

Nov 19, 2012 at 13:23

Next thing they'll be talking about is a simple At Retirement product.

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Arthur Schopenhauer

Nov 19, 2012 at 13:57

All they need now is a Sicilian actuary and all those untidy bits of uncertainty in planning could be eradicated

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Sascha K

Nov 19, 2012 at 15:35

"Trying to create simple investment products is a bit like trying to create a simple aeroplane. I don't believe it can be done and trying to do so is just a waste of time and money."

Dear Julian,

1. Take piece of A4 paper. 2. Fold in half. 3. Fold corner down. 4-5. Repeat step 3. 6. Repeat steps 3-5 on other side.

Yours, the Treasury.

Whether the Treasury would actually allow themselves or their families to fly in one is a whole other question.

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