‘Simple products could mean one rate for all’
Providers offering simple products after the retail distribution review is implemented may have to offer a single rate on accounts rather than allowing a back book of different versions to build up, Adrian Coles has warned.
The director general of the Building Societies Association, who is also chairing a sub-committee on deposits as part of a government and industry task force to create a simple products proposition, said pricing was a big issue.
Speaking at the BSA Annual Conference in Manchester last week, Mr Coles said: “Amending systems at providers to give some consistency is difficult.”
Mr Coles said the sub-committee was considering how rates on simple products would be set and was investigating whether they should be set at the Bank if England base rate or allow trackers.
He added: “We are looking at only allowing providers to offer one rate level in their simple product range rather than having a back book with different rates.”
Mr Coles said the sub-committee had initially considered designing fixed-term or notice deposit accounts, but was instead concentrating on instant access products that would have the same name across all firms.
He said minimum deposits and Isa versions were also under consideration, adding: “Consumers want to be able to set money aside and not need to take further action and access that money when they want.”
Peter Griffiths, outgoing chairman of the BSA and chief executive of Principality Building Society, also spoke at the conference. He said there were still questions on how the Coalition Government would support the mutual sector.
He said: “What lay behind the failure to remutualise Northern Rock? Was the Vickers’ banking report a failure?”
Mr Griffiths warned that there was a danger of consumers being excluded as a result of regulatory changes such as RDR and the mortgage market review, and called on building societies to plug the gap. However, he said he believed building societies still had a positive future.
David Penny, managing director of Somerset-based Invest Southwest, said: “The idea of a simplified product range is very attractive and aspirational.
“However the UK’s previous experience of charges, access and terms-standard products and stakeholder products proves that this is a difficult Utopia to create as such products do not have the backing of the product providers.
“Cheap, simple products will not be very profitable and they will not be promoted, so they probably will not succeed.”