Choice is great but when it
becomes so extensive that it causes confusion it becomes a problem,
believes the UK government.

“For many, financial services
are confusing and this is not surprising when there are, for
example, over 2,000 savings products on the market,” said financial
secretary to the treasury, Mark Hoban.

Go deeper with GlobalData

Data Insights

The gold standard of business intelligence.

Find out more

He added: “A vast array of
choice is not always a good thing; complexity can cause confusion
and inaction.”

Hoban’s remarks were made at
the launch of a consultation paper in which the government calls on
the financial services industry to develop a range of simple
insurance and savings products.

As a first step towards
simplification, Hoban said that the government has asked the
Consumer Financial Education Body (CFEB) to deliver a national
financial advice service.

“This will include a new
financial health check that will help people to take a holistic
view of their finances. It will advise people how to manage their
money better, the types of products they will need and where to get
further advice,” he commented.

The CFEB was established by
the Financial Services Authority and became an independent body in
2010. It has set stiff objectives which in its 2010-11 business
plan include:

  • Giving some 400,000 people
    completely new information to help them manage their
    money;
  • Motivating at least 220,000
    people to review their financial matters, increase their savings,
    plan ahead for their retirement and/or reduce their debt;
    and
  • Motivating at least 500,000
    people to take out financial products and/or switch to better
    deals.

In its consultation paper,
the government said that term life insurance, critical illness and
income protection cover are the insurance products most likely to
benefit from the development of simple products. It does not
envisage investment products will be included.

The government emphasised that it believes simple products
should be a wholly voluntary initiative and that it has no plans to
mandate the development of simple products, or to require that all
providers supply a simple product option.