Plan to close £27bn savings gap

BRITAIN'S £27bn-a-year savings shortfall could be slashed by more than a third by increasing financial incentives to invest, simplifying pension products and cutting regulation, the insurance industry's leading lobby group said today.

In a five-point plan handed to the Government, the Association of British Insurers said the financial services industry had to win back investors' confidence while the Government took steps to encourage saving.

ABI director-general Mary Francis acknowledged customers needed more information about with-profits funds, including an explanation of how profits were 'smoothed out' over good and bad times and the way charges were levied.

She said fewer laws regarding the sale of savings schemes and the use of more standardised products could cut the annual savings gap by £5bn. Better information about company pension schemes could reduce it by a further £2bn and a pension contribution tax credit would close the gap by £3bn.

Francis said insurers should expect to be criticised by Ron Sandler, the former Lloyd's chief hired by the Government to review the industry, when his report is released later this month, but concerns about the industry's stability were unjustified.