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Government facing insurer backlash over low cost saving

Date: Mon, 12 May 03 Analysis

The savings industry has rejected new Government plans to encourage lower-income groups to save more by introducing simple low-cost investments.

Life insurance companies and fund managers have told the Government that it should stop meddling in product design and leave pricing to market forces.

The companies are now lobbying hard to persuade the government that price controls are a bad idea and would be entirely ineffective if charges are limited to 1 per cent a year.

'Competition, not prescription, is the best way of meeting customers' needs. But if we must have price controls, there should be sufficient headroom to pay for help, guidance and advice,' said Mary Francis, director general of the ABI.

The Association of British Insurers has already announced that it would accept a 10 per cent charge on each contribution on top of the 1 per cent a year proposed by the Treasury to enable firms to reach four million lower-income consumers.

However, even in this case, savers would need to contribute at least £80 a month to make selling the plans a worthwhile exercise for product providers.

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