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Last Updated: Thursday, 4 November, 2004, 15:54 GMT
Low-cost savings rules unveiled
A piggy bank
Stakeholder products are low-cost, but will Britons get the savings habit?
The City regulator has unveiled its final rules for the sale of a new batch of stakeholder savings products.

From April 2005, savers will have the opportunity to buy the "off-the-peg" products, with charges capped at 1.5%.

The products - including a cash deposit account and investment product - will be sold with only limited advice.

The Financial Services Authority (FSA) said it believed safeguards within the sales process would prevent any systemic mis-selling.

The products, which will also include the Child Trust Fund and existing stakeholder pension, follow a review by Ron Sandler into medium and long-term savings in the UK.

We have created a more 'off-the-peg' style of selling that should suit the needs of consumers who are looking for an alternative to full advice
Dan Waters, FSA

His review, sponsored by the Treasury and published in 2001, recommended that a range of simple - many of them tax-free products - should be available to the public.

It is hoped the products will expand uptake of savings to low and middle-income earners, many of whom are unable to afford financial advice.

It has been estimated that there is a 27bn gap between what the public is saving and what they would need to put aside for an adequate retirement income.

"Not every consumer wants, or can afford, fully-tailored advice on their savings and investment needs," said Dan Waters, director of retail policy at the FSA.

"We have created a more 'off-the-peg' style of selling that should suit the needs of consumers who are looking for an alternative to full advice."

Redress rules

The FSA said it was dropping the introduction of a proposed "with-profits" product from the initial line-up.

This is because explaining the "smoothing process" - intrinsic to how the products work - is too complex.

The FSA said it believed its recommendations would create "as safe as possible" sales regime, which would not lead to systemic mis-selling.

However, there was always room for human error, it said.

Consumers who purchase any of the new stakeholder products can complain to the financial industry's dispute resolution service, the Financial Ombudsman Service (FOS) if they believe they were mis-sold.

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