Who can we trust with our money?

Warnings of a deepening pension crisis following the past fortnight's stock market falls stand in contrast to the chatter only three weeks ago of a new economic golden age to mark the Golden Jubilee. Then, we were celebrating that real earnings have risen two and a half times in 50 years; that many more people, especially women, are in work; and that in most households, basic necessities now absorb a much smaller slice of income than they used to, leaving a larger slice for leisure and luxuries.

Now, we are told, a sudden shift away from final-salarybased corporate pension schemes, which guarantee a fixed level of pension income, towards "money purchase" schemes, which expose the future retiree to the market's whim, threatens "pensioner poverty" for millions of today's workers and their families.

Meanwhile, the prospect of a long bear market in shares and an era of low interest rates makes all forms of saving for retirement an uphill struggle, with experts saying you may now have to save a quarter of your take-home pay for the next 20 years if you want the equivalent of a traditional two-thirds-offinal-salary pension. And for those who think a safer resort is still to be found in bricks and mortar, there are warnings that the house price bubble will burst soon, throwing late jumpers onto the bandwagon back into the negative equity trap last seen 10 years ago.

The bad news is that there is truth on both sides. We really are living in a golden age of financial freedom and opportunity, but the price of freedom is uncertainty. Fifty years ago, a chap embarking on a career in the City or the professions expected modest rewards, a job till he was 65, and a solid pension. Even in Silver Jubilee year, 1977 - when I had not long started work in the City myself - that was still what the horizon looked like: dull, safe, predictable. But somewhere in the Eighties it all changed: Thatcherism invited us to take responsibility for our own lives, to perform or get fired, to take out personal pensions so that we could hop from job to job, to own our own shares and buy our own former council houses. The effect of all that was to energise and incentivise; to drive people, individually and collectively as a nation, towards a realisation of their own potential.

Yet it also exposed us to the volatility and complexity of markets, over which as individuals we had no control. It placed us at the mercy of the financial services industry which had itself been given great opportunities by the Eighties revolution, the chance to devise and sell the products we would all need to enable us to fly solo in this exciting new world. What a complete hash the industry has made of it, what a failure of competence and trust.

From the first wave of pensions mis-selling to the nearcollapse of Equitable Life, supposedly blue-chip firms - in which many invested on the strength of the firms' names alone - have let their customers down time after time. The forecasts on which the industry based its calculations of future returns have proved repeatedly, wildly wrong. The City consensus for 2002 was that the FTSE 100 index might rise by 500 points, for example; so far, it has dropped by 500.

Driven by such failures of intelligence, products marketed as low-risk - such as split capital trusts, a gimmick aimed particularly at those with large school fees to pay - turned out to be nothing of the sort. Products designed to make borrowing easy, such as endowment mortgages, turned out to be incapable of performing as planned when markets turned down.

Even the simplest savings product - the tax-free cash ISA - sells less well than it should because consumers have so little faith in the salesmen. The Government's attempt to marshal financial firms and employers into offering low-fee "stakeholder pensions" has had a far lower response than it probably deserved, because so many workers no longer trust the system. Quite simply, they would rather take their cash and go shopping - which is one reason why our retail economy has remained so strong - or put it into a house, which is a big reason why property prices have soared at such an unsustainable rate.

The financial industry has not only let its own customers down; it has also distorted the entire economy in a dangerous way.

The answer for savers at this juncture must be: keep it simple, count your blessings, and don't panic. Never buy a savings product or a mortgage deal you don't understand. By all means take up your tax- free savings allowances, but in the plainest form. By all means have faith in your house, but don't buy a bigger one or a second one in the hope that it will make you rich.

Remember that your generation really is better off in almost every respect than its predecessors. And don't believe the deepest pessimists: of course markets will turn upwards again in due course.

As for the sellers of snake oil and the designers of perpetual motion machines who populate the financial services industry, many pundits say the only way to reform them is through heavier regulation. But in many ways that can only make matters worse, with more small print that savers won't read.

What is needed is for the financial firms to do what their customers have done, and take responsibility for themselves. Trust is a vital ingredient of a free society and a free market, and the industry has to find a way to regain its customers' trust. Offering gimmick-free savings products, which do exactly what they claim to do, would be a refreshing start.