On 5 February 2003 the Treasury issued its post-Sandler consultation paper on proposed specifications for "stakeholder" products. A key issue is the 1% cap on charges (which Sandler said was a "starting point"): the Government has learned that this may not be sufficient to achieve market penetration and is therefore willing to listen to the industry's case for change.

It should not be too difficult to demonstrate the additional consumer benefit the Government is seeking: only with a significant increase in the charging cap will it be feasible to provide financial advice to the target market. In view of continuing fears of future 'mis-selling' (or 'mis-buying') and in addition the Green Paper's emphasis on informed choice, the consumer need for advice is surely obvious. Equally, it has to be paid for. The Government may be keen to promote consumer awareness, but it is unlikely to go so far as issuing (for example) £250 vouchers to buy financial advice. The paper raises the possibility of including an advice service in the 'stakeholder' suite.

The Treasury adopts Sandler's 'tripartite' proposal for a unitised product; a with-profits (with-losses?) product; and a pensions product, but is lukewarm about extending the suite to encompass anything else apart from a Child Trust Fund (first proposed in the 2002 Pre-Budget Report).

A key issue for the Government is that these products should be 'lower-risk' as well as simple. The most controversial proposal is to limit equity exposure, at least within the unitised product, to 60%; in today's market that might seem attractive but in the long term it seems too restrictive. Views on alternative means of controlling risk are sought.

For the Sandler pension product, the Government thinks the existing stakeholder pension is adequate, subject to additional investment restrictions to control risk.