It’s started well, with two savings products that go straight to the top of the best buy tables. As I said in this space last week, more uncomplicated, competitive products will help the cause no end, as Virgin seeks to break the stranglehold the big banks have on the high street.
But we’ve been here before with Virgin Money, which launched as Virgin Direct in 1995 in a partnership with Norwich Union (now Aviva). Branson trotted out similar lines about transforming banking when launching the Virgin One Account in the late nineties. That was later sold to RBS, its partner in the venture.
The banking market is one of the hardest to break into, and Branson has yet to really outline how he intends to lure customers from the dominant high street brands. He talks about those banks having lost the trust of the public, and he’s absolutely right. Yet antipathy towards the banks hasn’t, as yet, been converted into action. Switching levels remain low, even after increased competition from the likes of the Co-operative, Metro (south of the Border), the bigger building societies and credit unions.
Success for Virgin Money would be a much-needed shot in the arm for the market, and it will be fascinating to see if it can begin to change deeply entrenched attitudes to bank switching. But Branson will be aware that this could prove one of Virgin’s toughest challenges.
There’s a growing school of thought that believes the biggest problem with pensions is that they are called pensions. Trust in them has been damaged hugely by mis-selling scandals, opaque and often excessive charges, poor investment returns and declining annuity rates.
Is that damage now irreparable? If it isn’t, plenty of work is needed, and urgently. Automatic enrolment in workplace pensions, starting in October, will boost the number of people saving, but whether it will improve the public perception of pensions is less clear.
Among younger generations in particular, Isas are a far stronger brand with clearer tax benefits, while property remains a more popular long-term investment option despite falling house prices.
Confidence in pensions as a long-term savings vehicle has rarely been lower, despite improvements. The range of investments you can access through pensions has never been wider, and charges on newer plans are far lower than in the eighties and nineties.
The tax relief paid on contributions is one of the biggest selling points of pensions – along with employer contributions to worker pensions – but awareness and understanding of these advantages is woefully sketchy.
The result is that the word pensions has overwhelmingly negative connotations, conjuring up devious insurers, dodgy salesmen and old age. In that sense, renaming pensions – as lifetime savings, for example, – would be a start. Yet, without greater flexibility, such as a debt-to-savings model and a direct link between pensions and Isas, it would be a superficial change and arguably futile.
Ed Miliband came under fire earlier this week for a keynote speech that many observers dismissed as ineffective. As so often with the Labour leader, the unconvincing delivery obscured more persuasive content.
For example, he suggested that energy suppliers should automatically put over-75s on their cheapest tariff.
Research by energy regulator Ofgem shows that older households are far less likely than others to switch to a cheaper supplier (partly because they are less likely to have internet access), leaving a disproportionate number paying bills around £300 higher than the cheapest on the market. For millions of pensioners on fixed incomes, it’s a huge difference.
Labour claims that some four million pensioners would benefit if their supplier was forced to put over-75s on the cheapest tariff automatically. It could easily have gone further by tackling the yawning chasm between the help available to households overwhelmed by mounting energy costs and the level of take up.
As pointed out in the article overleaf, all of the big six energy suppliers have schemes designed to help households struggling with their bills. The problem is that they don’t promote them, happy for customers to continue paying more than they need. As with so many of the problems in the energy market – not least appalling complaint-handling standards – this can’t be allowed to go on. Energy suppliers are now less trusted than high street banks. You’d think that would shame them into action.