Savings plans 'must be transparent'

INSURANCE companies are to be told to make savings schemes more transparent for customers. Pension schemes, endowment mortgages and savings products must explain to customers why their returns may not be as good as expected if the stock market does not perform well. Companies which sell with-profit policies, must also explain how and why bonuses are awarded each year.

The Financial Services Authority believes that the millions of consumers who hold with-profit policies are being left in the dark about how well their money is performing. It proposes that clearer information is offered and that a special committee is set up to represent policyholders.

Sir Howard Davies, head of the FSA, said: 'Before they buy, policyholders need to know how their money will be invested, the risks associated and the likely benefits. After sale, they need to be kept informed of the progress of their investment. And they need to be confident their interests are to the fore when directors are making decisions.'

The FSA will now consult on its proposals before any change is made in the rules.