A powerful committee of MPs has recommended radical changes that need to be made in the long-term savings industry.

In a hard-hitting report released on Wednesday, the Commons Treasury select committee said the public had lost faith in pensions and other products.

The cross-party group pointed to the collapse of Equitable Life, problems with endowment mortgages and shortfalls in split capital investment trusts among other difficulties that have contributed to declining confidence in the market.

It also criticised overly complex information thrown at consumers and the failure of independent financial advisers (IFAs) to maintain relationships with clients.

The financial services industry was urged to take several steps towards restoring trust in the security of its products.

Chief among them was the practice of publishing "summary boxes" in all investment information, which would make risks more clear in an easy-to-understand format.

The committee concluded that "an important test for all retail products should be: 'is the average person likely to be able to understand this unassisted?'"

Industry regulator the Financial Services Authority (FSA) was also encouraged to make the public more aware of its work and role.

In addition the Treasury was pressed to simplify the taxation of savings while the committee called for a forum of all industry stakeholders to be established and for IFAs to be brought under stricter regulatory control.

And savers should be able to look to other sources for sound financial advice, the MPs said, with barriers preventing workplaces and citizens advice bureaux offering help being lifted.

Economy

Committee chairman John McFall said the health of the sector was vital to the UK economy.

"This committee has uncovered a catalogue of problems that have beset the long-term savings industry in recent years," the Labour MP said.

"These problems have their roots in a savings industry that has failed to adapt to the modern world and the new investment climate of steady growth, low inflation and low interest rates.

"The result...is that people now trust their local supermarket more than many of our largest life insurers.

"This committee nevertheless recognises that long-term savings constitute a near £2,000 billion industry whose well-being is crucial to the future of the economy. It is important, therefore, to restore it to health."

He added that savings companies alone could not be expected to solve the problems, calling for ministers and MPs to get more involved.

"As a committee we have challenged the industry to come up with firm proposals to help restore customers' faith in the industry by becoming much more open about the products and how risky they are.

"We also call for much greater transparency about how much and for what the customer is being charged.

"The long-term savings industry is too important to be left on its own to sort out its problems.

"This damage must be reversed and we all have a part to play in this - government, legislators, regulators, consumer organisation and, crucially, the industry itself."

Industry

Mary Francis, director general of the Association of British Insurers, said that many of the recommendations would not meet with resistance.

"The ABI and its member companies will look carefully at the report's recommendations," she said.

"The report usefully brings together important issues for the industry, the regulator and its customers.

"As the committee recognises, we are already working closely with the FSA and other industry bodies on issues covered in the report, such as risk ratings and payment for financial advice.

"We also support the FSA's continuing work with the industry to help embed high standards of customer service throughout the retail banking, insurance and fund management sectors, summarised in the progress report published today. 

"We particularly welcome the proposed forum to bring all parties together to discuss the way forward on these important issues – a suggestion previously put forward by the industry."