Savers have long been baffled by financial information and the difficulty of comparing one type of savings plan with another. But help now is on its way in the form of the new, standardised Key Information Document, which banks, insurance companies and investment fund managers must give to all retail savers. Here, DG FISMA asset management unit's James Hopegood explains what is going on.

Managing our money

Investment fund managers, banks and insurance companies all compete to manage our money. And they are all offering to do the same thing: take our money, pool it with money from other savers and then invest it in a range of assets such as shares, bonds and property. Yet their savings plans often look very different and this can be confusing.

This confusion will soon end. From the start of 2017, all insurance companies, banks and investment fund managers will have to give retail savers a three-page document, the Key Information Document (KID), which will for the first time allow them to compare investment-linked insurance policies, investment funds and investment products offered by banks.

All these types of savings plans will have to outline what they aim to achieve, how risky they are, when savers can get their money back, how much they cost and how much money they can make or lose. All of this vital information must be set out in the same way, regardless of the type of savings plan. There will be some slight differences: for example, insurance savings plans will have the extra cost of life insurance included as well as a short description of the benefit of paying for it.

The KID will not apply to ordinary bank accounts, official pensions or direct investment in shares or bonds.

Consumer testing

The basic outline of the KID is provided for in the new rules on Packaged Retail and Insurance-based Investment Products, or PRIIPs. These rules were agreed by the European Parliament and Council last year. Experts from the European regulatory authorities are now working on the precise format of the KID.

A key element of this work is consumer testing to find out whether savers find, for example, bar charts easier to understand than graphs or tables. This consumer testing is being carried out in two stages, in 10 Member States and in a variety of languages.

The first stage eliminates some of the different ways of presenting information.  This has now been completed and the second and final stage, which tests different versions of the KID itself, will be kicking off shortly. How well the presentations work for the different types of products will also be tested. The results are expected in the late summer.

The overall aim of this forward-looking and evidence-based exercise is to give consumers more empowerment when it comes to understanding their choices and consequently greater confidence when investing their savings.

Read more on PRIIPs and KID