The general election is less than a month away, and the party manifestos are starting to emerge

15th May 2017

Plenty of conversations have been rumbling on when it comes to what should and should not be held as important tenets of a party’s election manifesto. But our concern is that while lofty issues such as overseas aid and immigration might be a bigger focus, the greater impact on people’s everyday lives comes from issues much closer to home, including how effective our UK savings market is.

There are myriad savings products in the UK to help people in various ways to save for their future – ISAs, fixed rate bonds, notice accounts, no notice accounts and even current accounts are getting in on the act by offering rates at certain deposit levels that put bank savings accounts to shame.

At the most basic level, these work well. Let’s take ISAs for example. In its simplest form, an ISA is a tax wrapper that allows you to grow your cash savings tax free.

However, the number and nature of ISAs has become more complicated, to such an extent that it is very hard for the general public to understand which does what, how much you can put in or take out of each – different providers may have different rules - and ultimately, which is the best for them.

Saga did some research among 10,000 of its over 50s customers and the response was that the ISA system is too complex and there are too many ISA types available. The rules surrounding ISAs caused even more consternation among its respondents – half of people were not aware you could transfer between cash and investment ISAs or that they should transfer to a new ISA if they wanted to switch, rather than closing one and opening another, which would remove the tax free status of that money.

We have long advocated simplifying ISAs, and this research suggests we are far from alone. It seems that there is such an overload in terms of rules that are suffocating products to such an extent that some are not being offered wholesale.

Lifetime ISAs (LISAs) are a great example – these came in at the start of the tax year, yet the majority of providers have decided not to offer them, in fact to date no bank or building society is offering a cash version.  You can only opt for a stocks and shares option from a handful of providers. They feel they are overly complex and add to a range of products that customers already struggle to get to grips with.

In short, there is a danger of ‘death by regulation’ for savings products. There needs to be protection for savers, of course there does, but when that protection is being created by such an intense level of rules that it does not make it viable to offer the products in the first place, who is this approach actually helping?

We will be tackling various aspects of our ‘death by regulation’ and if you have any examples you would like to share for us to examine, we would love to hear from you. Just email [email protected] with the details.

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