Individual Savings Accounts (Hansard, 27 October 1999)

§ Lord McIntosh of Haringey
My Lords, advertisements for individual savings account investments are currently regulated either under the Financial Services Act 1986 or are subject to the Banking and Building Society Codes of Conduct. The Financial Services Authority has worked closely with the banking and building society associations to ensure that comparable information is given in all ISA advertisements. The Government welcome this work by the authority in order to protect the financial interests of investors.

§ Lord Barnett
My Lords, I am obliged to my noble friend for that Answer. Is he aware that at the moment many such adverts seem to be deliberately misleading? I use the term objectively.
I have with me an advert—it is similar to many others—which states in very large bold print that there is a 9 per cent yield, tax free; underneath, in small print, it refers to projected yield; below that, in tiny print, about six lines inform the reader that investment value and income can go down as well as up. Does my noble friend accept that some innocent people—including, perhaps, Members of your Lordships' House—could be persuaded to invest in such an ISA? Does he agree that terrible damage can be done to people who invest without reading the small print? I see the noble Lord, Lord Saatchi, nodding. Perfectly reputable advertising agencies will no doubt draft such adverts. He will know that better than I do.
My noble friend's Answer is not good enough if we are to ensure that innocent people are protected. Will he do something more about the matter?

§ Lord McIntosh of Haringey
My Lords, I have long ceased to think that Members of your Lordships' House are innocent. However, the Financial Services Authority is aware of this type of advertisement. It will be considering those campaigns as a part of its routine 297 supervisory duties. I have seen the advertisement to which my noble friend referred and that, among others, will be considered by the authority.

§ Lord Saatchi
My Lords, has not the noble Lord, Lord Barnett, as he usually does, put his finger on a most important point about ISAs? Many people in the savings profession believe that ISAs have failed because, quite simply, they are too complicated. Generally, advertisers do not set out to produce misleading advertisements—unless they are for a certain political party, shall we say. However, can the Minister tell us whether the complication of ISAs and their failure are the reasons why the Prime Minister's promise that he would deliver 6 million extra savers as a result of ISAs has failed to be delivered? Instead of delivering that promise, there has been a halving of the savings ratio since the Labour Government took office.

§ Lord McIntosh of Haringey
My Lords, the noble Lord knows more about misleading advertisements for political parties than I do. I yield to him entirely on that point. However, he is quite wrong to say that ISAs have failed. Despite the fact that there was a rush into PEPs and TESSAs before the end of the financial year, in the first three months of ISAs, £7 billion has been invested in 3.5 million accounts. That compares with only £3.9 billion invested in the same period in the previous year. The punters themselves are giving the lie to the fears expressed by the noble Lord.

§ Lord Newby
My Lords, notwithstanding what the Minister has just said about the take-up of ISAs, does he accept, first, that a recent survey has found that over four-fifths of all ISAs are being taken up by those in social groups ABC1 and therefore are not being taken up by the people for whom they were specifically targeted?
Secondly, does the noble Lord agree with the view of the Consumers' Association that the rules are unduly complicated and that there are specific measures of simplification which could well lead to a greater take-up, such as abolishing the maxi-ISA, which is immensely confusing, and raising the limit on the mini-ISA?

§ Lord McIntosh of Haringey
My Lords, evidence on who is taking up ISAs is still anecdotal, but many of the companies issuing ISAs have reported that there has been a considerable increase in take-up among young people in the 18 to 24 year-old age group, and particularly among women. I simply do not accept that there is any evidence that ISAs are failing to meet our objective of extending the number of people who are saving.
On the noble Lord's second question, I am a supporter of the Consumers' Association and my family has subscribed to it since 1957. However, in this case the association has made a mistake. It carried out its investigation in May and June, or even in April and May, which were the first two months of operation. It has drawn the unjustifiable conclusion that ISAs are 298 too complicated. The association said, quite reasonably, that there has been a great deal of confusion among bank and building society staff, or at least there was when ISAs were first introduced. However, that does not justify a call for the recipe for ISAs to be changed.

Earl Ferrers
My Lords, is it of any interest to the Minister that when I looked at maxi-ISAs and mini-ISAs the other day, I found the things so complicated that I simply said, "Scrub it"?

§ Lord McIntosh of Haringey
My Lords, all I can say to that is that the noble Earl has a short fuse. The statistical evidence suggests that other people have a little more application than the noble Earl, are prepared to look at the range of ISAs on offer, and are taking them up.

§ Baroness Platt of Writtle
My Lords, does the noble Lord accept that ISAs are very complicated? I am quite keen to invest, but I find it difficult to find out all the details that would lead me to decide that one ISA is better than another. Does the Minister agree that we need a much less complicated system?

§ Lord McIntosh of Haringey
My Lords, we are dealing with two different issues here. The first is how to choose between different ISAs. It is not possible to make a generalisation about that because different people have different needs. Independent financial advisers exist precisely because of those differing needs. However, it does not follow from that that the system is too complicated. There are maxi-ISAs and mini-ISAs. Maxi-ISAs have one provider and up to three elements, while mini-ISAs have one element and up to three providers. It is not terribly complicated.