A hard-hitting report has called for a complete overhaul of the savings industry, in order to cultivate a positive long-term savings culture in the UK before it is too late.
The report by the Centre for Policy Studies (CPS) outlined problems in the savings industry that have contributed to the current pensions crisis, stating that it is widely distrusted by the public and must undergo radical changes in order to redeem itself.
The think-tank is proposing the introduction of simple savings products, "that will give customers what they want".
Its recommendations include setting up a system whereby every baby is automatically allocated a joint savings and pension account at birth, to be known as a "Super ISA" and run through Post Offices. In time, every person would have one seamless savings vehicle from birth to death, it said. In the meantime, it says today's ISAs could be linked to National Employment Savings Trust (NEST) accounts (to become Super ISAs).
Another proposal includes replacing the current Open Market Option in the annuity market with an annuities clearing house in which all annuity providers would be involved with. This clearing house should offer a limited number of simple, standardised annuity contracts, plus a more tailored suite of enhanced annuities, the CPS said.
Amongst its 19 main recommendations, the CPS is also calling for the Investment Management Association (IMA) to stop labelling funds, which would mean scrapping its Absolute Return and Protected tags, as they lack a common purpose with consumers, according to the centre.
The CPS also called for Government intervention if changes are not made in the next three years.
Commenting on the report, the IMA's chief executive Richard Saunders said: "Creating a positive long-term savings and pensions culture is of undoubted importance.
"The investment management industry is already taking a number of initiatives to provide simplicity and improve consumer confidence."
Mr Saunders was, however, critical of the CPS's report, saying: "While the report rightly focuses on some important issues, it also contains a worrying number of inaccuracies. These sorts of errors don't help the debate and risk misleading investors, causing them unnecessary concern and potentially undermining the long-term savings culture that we need."
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