The independent steering group, chaired by Carol Sergeant, listed an easy access savings account, a 30-day notice savings account, a regular savings account and a fixed term life insurance product in the first suite of products to brandish the “simple” accreditation.
Sergeant said: “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.”
All simple financial products will comply with an agreed set of high-level principles which cover product features, language, terms and conditions, pricing transparency, purchasing process, and regular information and product updates.
The language used in simple financial products will be straightforward and consistent between products, and all key terms and conditions will be the same for each product, making them easy for people to understand and compare.
But the absence of an income protection product in the first release has disappointed those who work in the protection sector.
Steve Devine, chairman of Protect, the protection market forum, said: “We are extremely disappointed that a protection product did not make the first suite of products.”
Devine said that income protection was considered to be too complex against the backdrop of the state benefit system but given the importance of protecting income and the problem of underselling, income protection would benefit a great deal from the government’s stamp of approval.
Sergeant said the recommendations have the full support of consumer and industry representatives, the government, the Financial Conduct Authority and the Money Advice Service.
She added: “It is now really important to make the recommendations a reality.”
Adrian Coles, director-general of the Buildings Society Association, said: "One of the main aims of this review is to encourage more people to save and it identifies complexity as one of the barriers. We understand that the current economic climate is challenging for savers and that squeezed household budgets, coupled with lower interest rates, are currently a disincentive to saving. Nevertheless, the report makes some helpful proposals based on consumer research for the further development of products under the Simple Products banner."
A simple financial products badge will be created and awarded to qualifying products via a robust accreditation process.
Simple financial products will carry this badge, the brand of the provider, and the British Standards Institution Kitemark to clearly identify which products meet the simple financial products standards.
The BSI will be responsible for setting product standards, licensing the use of the simple financial products brand and monitoring adherence to the product standards and specifications.
Which? executive director Richard Lloyd said: “We welcome proposals to give consumers clearer, concise and jargon-free information so they can easily compare savings, insurance and other financial products.
“Consumers should not have to tackle pages of terms and conditions and they should be told clearly what rates and charges apply so they can shop around more easily and get a fair deal.”
Lloyd added: “We now look to the financial services industry to deliver on these proposals.”
The report also proposed five next steps for the government to undertake;
Trade associations represented on the steering group have committed to negotiating the specific arrangements with the BSI to take this work forward.
All of these trade associations will continue work on broader simplification and standardisation of language, working with the BSI and regulators.
The Association of British Insurers will report back on its work on income replacement insurance in six months.
The Money Advice Service will provide support and guidance about simple financial products when these are available.
HM Treasury will organise a progress review of simple financial products in twelve months.
