THE Treasury reached an uneasy truce with its most vocal critics in the insurance industry yesterday as it caved in to demands to raise the fees that providers will be permitted to charge on its planned range of low-cost savings products.
Ruth Kelly, Financial Secretary to the Treasury, confirmed that the new “stakeholder” range of products would allow firms to charge 1.5 per cent a year on funds for the first ten years, thereafter reverting to the 1 per cent limit originally planned.
The Treasury’s decision to backtrack on its initial support for the 1 per cent limit recommended by Ron Sandler in his review of long-term savings came after fierce industry lobbying. Gary Withers, chief executive of Norwich Union, the UK arm of Aviva, said: “We’ve been tough on the 1 per cent charge because we felt it was depressing the market. This will open up parts of the market we can’t access at the moment.”
Jonathan Bloomer, chief executive of Prudential, also strongly supported the move. He said Prudential planned to unveil a range of products with a 1.5 per cent charge “within a couple of months”.
But Standard Life, the UK’s largest mutual, said the Treasury’s concession to the industry was insufficient.