The FSA has today failed to fully commit to proposals for a "filtered questions" approach proposed i...
The FSA has today failed to fully commit to proposals for a "filtered questions" approach proposed in DP19, saying it needs further feedback in the form of a cost-benefit analysis and additional consultation by year-end.
DP19 outlined the different ways that the proposed Sandler suite of simplified products could be made reality.
The FSA admits that the feedback received on its proposals has highlighted the difficulty of balancing the need to meet suitability requirements against the need for the industry to make a profit from providing simplified products.
However, it is sticking to its conclusion that a series of filtered questions will provide the consumer protection needed to ensure that simplified products work, while also meeting providers needs to run a profitable business.
"We continue to view a filtered questions approach to guided self-help for consumers as promising."
"Before we can formulate proposals for a consultation , and make a balanced cost-benefit assessment, consumer research on the effectiveness of a filtered question approach is essential. We are commissioning such research on the basis of the decisions the government has now made about the stakeholder product specification."
Delaying any firm decision on the rules for simplified products gives the FSA time to take advantage of what may be a government U-turn on the 1% price cap.
As reported on IFAOnline yesterday, the Treasury may be considering scrapping the 1% rule for the Sandler suite in favour of 5% initial and 0.75% annual fees - and today it confirmed that it is not committed to the 1% cap.
"The Government agrees with Ron Sandler's recommendation that a price cap on the is an essential component of these regulated products in a market that is characterised by lack of price competition and consumer weakness," the Treasury says today.
"The level of the cap will be set later this year when the FSA market research into the sales process is completed."
Despite the FSA commitment to further analysis before writing rules on the manufacture, sale and distribution of simplified products, the Treasury today says that there will be four types of Sandler products.
These are: a short-term, medium-term and long-term investment products; and, eventually, the Child Trust Fund.
The short-term product will be the equivalent of existing CAT-standard cash ISAs.
The medium-term product will allow 60% exposure to equities through either a "pooled investment products" or a "smoothed investment returns" product based on Sandler's proposals for with-profits policies.
The long-term products will be the equivalent of existing stakeholder pensions, with the requirement that equity holdings be replaced with fixed income as the policyholder nears retirement. Draft regulations on the long-term product will be published early next year.
Details on how the Child Trust Fund will become part of the simplified suite will be published by September this year, the Treasury says.
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